Earlier this year the Simon-Kucher & Partners consulting firm issued a report titled The Future of Fees — Real Life Pricing Innovations in Wealth Management. The report explored eight fee models advisors have employed as alternatives to the traditional approach of charging a percentage of assets under management.
Wei Ke, Ph.D., one of the report’s authors commented that “the future of fees is not a shift from the traditional AUM to a new fee model. Rather, the future will be characterized by more diversity where a variety of fee structures will emerge to meet the needs of new and underserved client segments and changing market conditions.”
The Simon-Kucher report focused on innovations in pricing by financial advisors within their practices. But the same transformation in pricing alternatives is taking place among firms that serve financial advisors. These innovations are creating the type of rich diversity of pricing options for financial advisors predicted by Dr. Ke.
Here are some examples:
1. First Ascent Asset Management. In 2016 First Ascent, of which I am CEO, introduced flat-fee pricing to the world of turnkey asset management platforms. Up to that time, all TAMPs charged a percentage of assets under management to the advisors they served. First Ascent charges a flat $500 annual fee with a $1,000 household cap.