Last Monday, Morningstar announced the addition of two tools to its Advisor Workstation: FeeCheck and CommissionCheck. As their names imply, these tools enable advisors to compare the fees or commissions they charge their clients with what other advisors are charging their clients.
They were developed by PriceMetrix, a Toronto-based consultant to both Canadian and U.S. wirehouses and brokerage firms. While I’m not sure that with other forms of additional compensation for both BDs and advisors, the raw commission numbers will be particularly helpful, the idea of comparing AUM fees across the industry is intriguing—provided an apples-to-apples comparison is possible.
PriceMetrix’s FeeCheck is a cool widget, to be sure. It appears on the WorkStation home page, where, with a click, advisors are taken to a simple table which allows them to input client account size, asset mix (equity versus fixed income), total client assets managed, firm’s total assets, firm revenues, the advisor’s years in the business, and, of course, the fee charged. Then the advisor can choose whether to compare his or her fee with the fees charged by similar advisors in their firm or with the other 20,000 advisors in the PriceMetrix data base.
The next screen is a simple but very clear horizontal bar graph showing the top, bottom and median fees charged by the advisor group selected, and where this advisor’s fees fall in that range, along with a “recommended” target zone for the advisor’s fee number. My criteria for good graphics is that the viewer can “get it” in a quick glance, without much if any textual explanation. The FeeCheck graph could serve as the example of what a graphic should look like: here’s the fee range, here’s your fee, here’s what you might think about charging.
What Your Peers Are Reading
Yet as good as this presentation is, the question we need to ask is the same as we should be asking about each of the exploding number of data graphs on the Internet everyday: How good is the underlying data? How well does it support the conclusions reached?
In this case, PriceMetrix’s 20,000 advisors comprise the brokers at its 100-plus broker/dealer clients. Which means they are virtually all captive brokers or independent registered reps. Moreover, between 20% and 25% are Canadian advisors.