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Almost Half of Wealth Management Clients Believe They’re Not Charged Fairly

May 21, 2019

Wealth management firms seeking to ensure their clients are happy with how they’re charged may need to revisit their pricing options, according to news reports.

Close to half of all discretionary wealth management clients don’t expect to be charged fairly, according to EY’s 2019 global wealth management research report, FA-IQ sister publication FundFire writes. The size of the fees, however, isn’t necessarily the problem: only 56% of wealth management clients understand the fees they’re charged, EY found, according to the publication.

“It’s not that clients think that fees are too high, it’s more to do with the lack of transparency, predictability and concern that there are hidden fees,” Nalika Nanayakkara, a partner and Americas wealth and asset management advisory lead at EY, tells FundFire. “This boils down to the lack of trust.”

There’s also a disconnect between how advice firms charge and how wealth management clients would prefer to be charged. While fees tied to assets under management are the most common, with 22% of the clients paying such fees, 22% of them would prefer a fixed fee — but only 11% pay under this model, EY found, according to the publication.

In addition, advice firms are offering alternatives, such as hourly fees, fee-for-service and subscription-based models, as well as hybrids of different models, Nanayakkara tells FundFire. Some firms are also unbundling fees for products and advice, according to the EY report, the publication writes.

“By splitting fees more discretely, firms are experimenting with creating clearer delineations between receiving value from investment returns [versus] personalized financial planning and advice,” the report says, according to FundFire.

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