Wealth Managers, Stop Cutting Fees If You Want to Survive

High-net-worth clients are more concerned with high-level service than with what they are being charged for it, Boston Consulting Group says.

Wealth managers must stop offering clients unnecessary fee breaks and invest in advanced analytics to boost revenue because the industry faces a “complete transformation” in coming years, a study found.

Private bankers generally charge one in three customers fees that are below what they could be because they’re worried about losing business, according to a report earlier this month by the Boston Consulting Group. Yet most clients aren’t even fully aware of the fees they pay and focus on the level of personalized service they get when deciding whether to switch firms, the report found.

Private banks, which for decades relied mainly on the personal interaction of clients and their relationship managers, must leverage client data and advanced analytics to set themselves apart, the study argues. While the industry has benefited from a surge in global wealth since the financial crisis, increasing competition and the rise of low-cost, passive investing are putting pressure on margins.

“The stakes for wealth managers can be enormous,” Anna Zakrzewski, one of the study’s authors, said in an interview. “We expect leading firms to further separate themselves from the pack over the next few years, a gap that will be increasingly difficult for slow-moving players to close.”