Advisers generating less revenue from each dollar managed

Fee pressures, lower rates blamed for the two-year decline

Apr 7, 2014 @ 12:01 am

By Liz Skinner

Revenue that advisers generated from client assets fell during each of the past two years, even though they increased their assets under management over that period, a new report shows.

The average revenue advisers generated from assets declined to 0.68% last year, from 0.69% in 2012 and 0.72% in 2011, according to a PriceMetrix Inc. report released Monday that analyzes transaction and account data of 40,000 advisers.

Fee pressures are likely the cause of some of that return slip, authors of the report said. In addition, the amount of assets that advisers are managing for clients has increased, which can lead to those clients' paying a lower rate, said Patrick Kennedy, co-founder of PriceMetrix, a practice management software firm.

“When you look at the overall revenue on assets from each relationship, it's not always a bad thing if it's going down, as long as your clients are getting bigger,” he said.

(See also: Adviser 2.0: Managing growth)

Regardless of the trigger, the PriceMetrix data show that adviser charges for fee-based accounts are on the decline. Advisers returned about 0.99% in 2013 from fee-based accounts, a drop from 1.06% in 2012 and 1.14% in 2011, the report found.

Advisory firms also retained slightly fewer clients in 2013, averaging a 90% retention rate, compared with a 92% rate in 2012 and 91% rate in 2011, the report said.

It's surprising that the retention rate would go down just as equity markets have gone up, proving that it takes more than just positive returns to hang on to clients, Mr. Kennedy said.

“A bull market is not a business growth strategy,” he said.

Strong growth in the equities markets, such as the S&P 500's 30% climb in 2013, is the likely reason adviser assets overall grew. The average AUM of advisers increased 12% last year to $90.2 million, from $80.8 million in 2012, the report said.

Another finding that worries Mr. Kennedy is the rising age of clients. The average age of clients was 61.1 last year, up from 60.5 in 2012 and 60 in 2011.

“The average client is getting older at a rate greater than the average human,” he said. “That's a cause for concern because it means we're not getting younger investors into the market.”

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

What's the first thing advisers should do when they get home from a conference?

After attending a financial services conference, advisers can be overwhelmed by options, choices and tools. What's the first thing they should do when they get back to their office?

Latest news & opinion

Maryland jumps into fiduciary fray

Legislation would require brokers to act in best interests of clients.

8 apps advisers love for getting stuff done

Smartphone apps that advisers are using in 2018 to run their business more efficiently.

Galvin's DOL fiduciary rule enforcement triggers industry plea for court decision

Plaintiffs warned the Fifth Circuit that Massachusetts' move against Scottrade signaled that the partially implemented regulation can raise costs for financial firms.

Social Security underpaid 82% of dually entitled widows and widowers

Agency failed to tell survivors that they could switch to a higher retirement benefit later.

Is Fidelity competing with retirement plan advisers?

As the Boston-based mutual fund giant expands the products and services it brings to the retirement market, some financial advisers say the firm is encroaching on their turf.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print