Wirehouses least likely to lose clients because of high fees, Cerulli says

Wirehouses are the least likely to lose clients due to high fees, while independent financial advisers see greater attrition for that reason as they tend to struggle with the message about the value of their services, according to Cerulli Associates.

Only 5% of clients left the wirehouses last year because they felt fees were too high, compared with 20% for dually registered advisers and 16% for independent broker-dealers, the Boston-based research firm said in a report this month.

“Niche specialization helps advisers tell a compelling story that demonstrates to the client how they receive value in exchange for the fees they pay,” Cerulli said. “Clients who are not able to see this value will naturally be more sensitive to fees.”

The wirehouses, or the full-service brokerage businesses of Morgan Stanley, Bank of America, UBS and Wells Fargo, target wealthier clients than their competition, with about 24% of their core market focused on investors with more than $5 million to invest, according to the report. These clients may be valuing a set of specialized skills their advisers may have to address more complicated financial portfolios, Cerulli said.

More than two-thirds of financial planners across all channels, including registered investment advisers, target people with between $100,000 and $2 million to invest, a “sweet spot” range that’s just complex enough to require advisory services of firms without high-net-worth specialization, Cerulli said.

Only 3% of the independent broker-dealer market is focused on households with more than $5 million of investible assets, according to Cerulli. Dually registered advisers, or those who are both an RIA under the watch of the Securities and Exchange Commission and a licensed broker-dealer overseen by the Financial Industry Regulatory Authority, had 9% of their clients represented by that end of the market in 2015.

Related Topics: Client Servicing