Heads of Raymond James, Ameriprise say race to zero is getting murky

CEOs of both firms say they're in the dark about UBS' move to cut fees on some accounts

Oct 24, 2019 @ 2:11 pm

By Bruce Kelly

The financial advice industry's race to zero fees and commissions is getting confusing, with two top executives at major firms wondering today what UBS Financial Services' elimination of fees on separately managed accounts is all about.

Are the fees at of the UBS accounts bundled or unbundled — meaning is the charge for asset management included or separate from the charge to the adviser — Paul Reilly, CEO of Raymond James Financial Inc., asked during a conference call to discuss last quarter's earnings.

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"UBS came out with something," said James Cracchiolo, CEO of Ameriprise Financial Inc., also during a call with analysts to discuss earnings. "We're unclear what it exactly means."

In an internal memo on Tuesday, the Swiss bank announced that it is eliminating management fees on select separately managed accounts.

While there is no specific price set on SMAs, clients across the industry typically pay 1%, or 100 basis points, for advice on their money. Under that scenario, an SMA can cost 30 basis points and the adviser would charge 70 basis points.

Senior UBS brokerage executives have said the focus of their business is providing the services of financial advisers, and asset management options like SMAs are tools.

The new pricing at UBS will go into effect Jan. 13.

It's unusual for senior executives at large firms to name competitors directly in their comments, but the move by UBS left some questions.

"UBS' announcement wasn't clear," Mr. Reilly said. "A few years ago, they unbundled between what the adviser charged and the firm. I don't know if it's a re-bundling, so we're going to have to see more."

"There are always people pushing that dynamic," he said, referring to pricing. "We've been going through that for years and it's not new."

In their comments, Mr. Reilly and Mr. Cracchiolo noted that, unlike discount brokers such as Charles Schwab and Fidelity, neither Raymond James and Ameriprise have large direct-to-consumer businesses that would be directly affected by eliminating commissions on trades for stocks and exchange-traded funds. Schwab announced its decision to eliminate those commission at the start of the month, shaking up the industry.

Earlier this week, though,Raymond James did dip its toe into the financial advice price war when it said it was eliminating transaction fees for stocks, exchange-traded funds and options for the firm's small investment adviser division. On the call with analysts, Mr. Reilly said that move could represent a decline in revenue in the neighborhood of $7 million.

Meanwhile, both Raymond James and Ameriprise said they had posted strong results on recruiting financial advisers.

Raymond James reported 8,011 financial advisers at the end of September, a new high and an increase of 107 for the quarter and 198 for the firm's fiscal year.

Ameriprise reported 9,930 financial advisers at the end of September and recruited 96 advisers during the third quarter.

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