“This is the first year in which fees are exceeding commissions for us as a firm,” says Wayne Bloom of Commonwealth Financial network. As a result, Commonwealth — which includes more than 1,000 advisors — is raising payouts in its fee-based business and lowering administrative fees.
Commonwealth’s total assets stand at $45 billion, about one-third of which are part of fee-based programs. “It’s more than doubled in the past two years,” says Bloom. For a typical advisor, about half of a book of business is based on fees.
The most important difference between the payouts at Commonwealth and at some competitors, says Bloom, is how much of the fee-based business is covered by the payouts of 90 percent and higher. “Ours are linear,” he says, “which means they cover the entire basket” versus a tiered system in which only a certain amount of assets or business over a certain level gives an advisor these high payout amounts.
The average Commonwealth advisor has some $45 million in assets under management and yearly sales of $310,000. And about half of the advisors in Commonwealth are expected to see their administrative fees drop and their payout rise for fee-based work, the company says. The firm will pool the fee-based assets of advisors working in a group, or multi-producer practice, so that they receive the maximum payouts and lowest fees.
“It’s the fifth time we’ve lowered fee-based pricing,” explains Bloom. “As we get bigger and bigger, we are giving the economies of scale back to the advisor.”