If you’re shifting to a fee-based practice, you might be concerned about the difficult client conversations that accompany that shift. However, clients might welcome those discussions as a pleasant development: research finds that advised clients prefer a fee-based structure.
Boston-based Cerulli Associates finds that, in the U.S., 87% of advisor-directed households prefer fee-based, as do 74% of advisor-assisted households.
In contrast, most self-directed investors prefer commissions-based relationships (56%).
“More independent investors will generally favour costs tied directly to specific activity,” says Scott Smith, director at Cerulli, in a release. “But the advisor-reliant segment is far more willing to pay a comprehensive fee to outsource the bulk of its responsibilities.”
Among advised investors, asset-based fees are most popular, preferred by 61% of advisor-directed investors and 47% of advisor-assisted ones. Retainers were preferred by 22% and 23% of these investors, respectively. Hourly fees were preferred by only 4%.
Cerulli’s research finds that the percentage of U.S. fee-based assets increased to 45% from 26% between 2008 and year-end 2017. In the release, the global research and consulting firm says it expects this shift to continue as advisors increasingly position themselves as “clients’ partners in pursuit of long-term goals rather than transaction facilitators.”
Further findings about compensation arrangements can be found in Cerullli’s first-quarter 2019 issue of The Cerulli Edge — U.S. Retail Investor Edition.