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Revealed: How Fee Levels Contribute to Client Loss

June 18, 2018

Advisors hoping to retain and attract clients by lowering their fees better think again — the vast majority of clients aren’t totally clear about what they’re paying anyway, according to a new study cited by Bloomberg.

Concerned about losing clients to rivals, private bankers charge one in three clients below what they actually could, according to a report by the Boston Consulting Group cited by the news service. But around nine out of 10 wealth management customers “aren’t fully aware” of the fees they pay, according to the report, Bloomberg writes. Clients do appreciate when their advisors drop their fees, but often don’t actually recall the details of those reductions, according to the report, which analyzed data collected from more than 150 wealth managers, the news service writes.

It’s true that competitive pressure and the advent of low-cost investing options have made it harder for wealth management firms to make a profit, BCG says, according to Bloomberg. But instead of slashing fees, advisors should focus on service, according to BCG, which found that more than 70% of clients look to highly personalized service as essential to their decision to go to another company, Bloomberg writes.

BCG also suggests wealth managers harness client data and sophisticated analytics to stand apart from their competition, according to the news service. Doing so could result in up to 15% efficiency gains, as well as in top-line growth of up to 30%, according to BCG, Bloomberg writes. BCG’s analysis concludes that the most profitable wealth management outfits are the ones growing their top line at a faster rate than the average and getting higher returns on their assets, according to the news service.

“We expect leading firms to further separate themselves from the pack over the next few years, a gap that will be increasingly difficult for slow-moving players to close,” Anna Zakrzewski, one of the study’s authors, tells Bloomberg.

By Alex Padalka
  • To read the Bloomberg article cited in this story, click here.