Morgan Stanley Smith Barney said to be moving away from wrap fees

DEC 08, 2009
Morgan Stanley Smith Barney is planning to simplify its managed-account fees to emphasize the advisory relationship between registered representatives and their clients. The new pricing model — expected be in place in April — allows reps to set a single rate for all fee-based work with individual clients, according to a report today from FundFire.com. Rates will range from 1% to 2% of client assets for most programs and up to 2.5% for separately managed accounts. In certain special cases, fees can be below 1%, according to the website. Morgan Stanley Smith Barney officials did not return calls for comment. Industry, experts, however, applauded the brokerage’s move. “We have been talking about the need to move to this vehicle-agnostic approach to fees for a while,” said Jeff Strange, a senior analyst at Cerulli Associates Inc. “If broker-dealers are serious about providing more fiduciary responsibility and offering the best products ... they need to do this.” Smaller firms have already started to move toward providing more-simplified managed account fees based on the advisory relationship, he said. The move by Morgan Stanley Smith Barney is significant because it is the biggest firm to make a move away from traditional wrap fees and towards an advice-oriented approach, Mr. Strange said. Other firms will follow, but not right away, said Doug Trott, president and chief executive of PriceMetrix Inc., a software firm specializing in brokerage pricing models. That’s because moving to such a pricing model is very complicated, he said.

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