AssetMark's new RIA chief takes the fight to fee compression

Former Envestnet executive Phill Rogerson, who joined competitor AssetMark in July as the firm’s new RIA channel head, sees expanding client services as a mechanism advisors are successfully using to fight fee compression.

“There is fee compression at almost every level in the market — not every level. Most of the data that I see indicates that advisory fees are not actually being compressed. They're expanding modestly,” Rogerson told InvestmentNews.

A report earlier this year from consulting firm Cerulli Associates outlined how lower fee standards are impacting financial advisors, forecasting that by 2026, 83% of advisors expect to charge less than 1% for clients with more than $5 million in investable assets.

Advisors are increasingly able to avoid fee compression through broadening their services, explained Rogerson. He explained that AssetMark’s turnkey asset management program (TAMP) can provide insurance issues, credit and debt facilities, tax planning and efficiency, intergenerational wealth transfer support, and private asset investing as some examples of services that enable advisors to circumvent fee compression. 

“[Advisors] are being asked to provide this broader array of services, and as they do that they can command more fees from the marketplace,” said Rogerson. “As the rest of the industry goes through fee compressions, the advisors are able to pick up the slack. So they're increasing their service level and the fee to the client remains roughly the same, but the advisor is able to command a greater percentage of that overall fee because they're providing a higher level and greater degree of service.”

Leading RIA aggregator Wealth Enhancement told InvestmentNews earlier this year it was deploying fee expansion within its $118 billion firm. James Bogart, CEO of $3 billion RIA Bogart Wealth, also said his firm increased fees over the past year but his business encountered margin compression due to payroll increases he attributed mostly to rising talent costs. 

Competitive dynamics in the RIA industry have shifted amid continued record-breaking M&A consolidation being driven by private equity’s investment in aggregators that snap up smaller firms. “It's not the mom and pop business that it was by any stretch 20 years ago,” said Rogerson, who worked at Envestnet since 2019 and Russell Investments for nearly 30 years. 

“RIA firms are having to deal with competitors who are better capitalized than they've ever been, larger and broader than they've ever been, and run by very professional management teams that have been brought in from providers of capital,” he added.

“If you're a $10 billion firm or maybe smaller than that, you're a big firm and you've got a lot going on. But you've also got to compete with some of the largest aggregators in the marketplace who have literally hundreds of billions of dollars on their platform, and major private equity backers.”

A Chicago-based private equity firm acquired AssetMark in a $2.7 billion deal last year with Chinese company Huatai Securities. AssetMark, which has over $139 billion in platform assets, announced in July that it was opening a new office in Charlotte, NC, to serve as the company’s new hub for serving clients and advisors on the east coast. 

“Our feeling is that we're the easy button to help those firms compete with the largest players in the market in the way that they want to. They don't have to take the whole bundle if they want to just pick and choose the services that are most relevant to their client base and the business that they're building, we offer a way to do that in a seamless way,” Rogerson said.