Independent financial advisors are optimistic about their business but increasingly feel the need to stand out from the competition by offering more services, according to Schwab’s latest Independent Advisor Outlook Study. Moreover, many are already providing those services, such as tax planning and health care planning, for no additional cost.
“Forty-four percent of advisors are providing more services to clients without charging for them and two-fifths have been putting more time into each without an increase in fees,” according to the report, which surveyed a little more than 900 advisors, RIAs.
“It’s fee pressure but instead of a reduction [in fees] they’re doing more for the same fee,” said Bernie Clark, head of Schwab Advisor Services, on a conference call with reporters. “So scale is critically important.”
Clark said advisor fees average 0.75% to 0.80% “all in,” though some advisors charge a discrete fee for planning alone.
Chuck Bean, the founder and CEO of Heritage Financial in Westwood, Massachusetts, who was also on the call, said his firm has lowered its management fee a few times over the years and added “holistic services” but couldn’t do that if not for technological advances.
Seventy-six percent of advisors think technology will help them stay ahead of most competitors, but 24% said they’re investing more in technology without seeing enough increase in scale to offset that expense.
Investment costs are another major consideration for advisors.
Sixty-five percent of advisors said they seek the lowest cost for the product that best fits a client’s needs, while 28% said they look for the best fit for a client regardless of cost and 7% said they always seek the lowest cost option.