Fee-based model adoption is accelerating among advisors, says Cerulli

The shift toward fee-based advisory models has become a defining trend in the wealth management industry as both clients and firms embrace the benefits of a fiduciary framework, according to a new report by Cerulli Associates.

Cerulli's latest report adds to the evidence that fee-based arrangements are growing in dominance as they create a foundation for many advisors' client relationships.

According to Cerulli, advisor-managed assets grew by 92 percent in the 10 years between 2014 and 2023 to surpass $30 trillion. Meanwhile, assets in fee-based accounts – including managed account programs and RIA platforms – outpaced that growth with a 169 percent surge, going from roughly $6.5 trillion to exceed $17 trillion.

“Clients want wealth management relationships in which trusted advisors offer clearly articulated holistic advice solutions customized to their needs and goals,” the Cerulli report said.

A key factor driving the adoption of fee-based programs, the report stressed, is the expectation for fiduciary alignment. While the SEC’s Regulation Best Interest standard has strengthened investor protections in the three years since taking effect 2020, it does not require advisors to put clients first.

To address clients' preference for ongoing engagement and a fiduciary level of care, while advancing their own shift from transactional relationships to ongoing advice, Cerulli predicted that wealth managers will continue to drive an increasing proportion of new assets toward managed accounts.

The report also showcased significant growth in fee-based managed account use across wealth management channels. Wirehouses remain strong proponents, increasing their managed account asset share from 33 percent in 2014 to 45 percent in 2023. Meanwhile, independent broker-dealers and insurance firms exhibited the steepest growth, jumping from 24 percent to 50 percent over the same period.

To meet evolving client expectations, firms are emphasizing goals-based financial planning over traditional portfolio performance benchmarks. Cerulli highlights the shift as a response to the commoditization of investment management, with advisors increasingly differentiating themselves by helping clients achieve personalized financial goals.

"Advisors and their home offices can offer differentiation through a dedicated financial plan and tracking progress toward a client’s goals rather than simply aiming to beat a market index," the report said.