Why wealth managers need to change their business models

By International Adviser, 28 Sep 16

Faced with an increasing pressure on margins and the cost of regulatory compliance, EY gives five tips on how wealth managers can change their business models to weather the storm of digital disruption.

2. Fees

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EY found that approximately a third of clients are dissatisfied with the way they are charged and roughly a quarter of clients are not sure how they are being charged.

As more and more firms around the world move away from a commission-based model to a fees based model, clients are showing a “clear preference” for fixed fees.

The company adds that with digital advisers offering low fees for asset allocation advice, clients are looking to better understand the value added by human advisers.

Clients are also challenging the correlation between size of the account and fees implied by AUM- based fees.

“All this has made clients doubtful about the current fee propositions, and the firms that figure this out will have a distinct competitive advantage,” said EY.

However, the firm was keen to make clear that “better pricing does not necessarily mean lower pricing”, revealing that often it means a better understanding of the correlation between what you pay and what you get.