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February 04, 2016 at 09:36 AM
Advisors’ fear of losing clients when raising fees appears to be unwarranted, according to a new SEI Advisor Network report.
SEI asked 539 U.S. affluent investors what they would do if they felt they were paying too much for advisory fees.
SEI defines “U.S. affluent household” to include the mass affluent (households with $250,000 to $999,000 in investable assets) and the high net worth (households with at least $1 million in investable assets). Of the overall affluent sampling, 211 were mass affluent and 328 were HNW.
Among the mass affluent investors, 22% said they would not say or do anything and would stay with their advisor. The same was said of 16% of the high net worth investors. According to the survey, 27% of the mass affluent investors (and 27% of the HNW investors) said they would ask their advisor for a reduction in fees and would stay even if they said no. Meanwhile, 30% of the mass affluent investors (and 27% of the HNW investors) said they would ask their advisor for a reduction in fees and, if granted, they would stay.
A separate SEI survey of 775 financial advisors also found similar findings with those of the consumer attitudes.
“The vast majority of advisors report that their fear of losing clients when they jumped to an AUM model was unfounded; they were able to retain 90% of all clients,” the report says.
According to SEI, less than 10% of clients sought another advisor or moved to a web-based advice solution.
SEI’s survey of consumers also examined how investors compensate their financial advisor and found a number of consumers were uninformed.
Participants were asked, “how does your advisor get paid?”
While 24% said “I am not sure how my provider is compensated,” another 14% said “I do not compensate my provider.”
SEI says this 38% of mass affluent consumers are “either wrong or confused.”
