Fee-Based Accounts Face Pricing Pressure; Maybe The Move Down-Market Is To Blame? Hot

In their latest "Annual Report on the State of Retail Wealth Management," the practice management gurus at PriceMetrix lay out plenty of benchmarks like number of clients (down), annual production (up), average account size (controversial). Everyone should at least glance at it to see where your business fits into the industry trends.

Not surprisingly, fee-based business is up over the last two years as advisors try to diversify beyond market-driven transactional accounts into planning-oriented approaches. Average number of fee accounts per advisor is up 43% since 2008 and these accounts now represent about 24% of the industry's overall AUM.

However, the average size of these accounts has actually dropped 12% over the last two years to $255,000, while the net return on those assets -- basically the management fee -- has edged down 6% to an average of 1.32%.

PriceMetrix characterizes the last few years of industry evolution as being toward advisors providing a higher level of service to fewer, richer families. This seems to be true on the transaction-based side, but clearly the fee business has migrated down market in order to grow.

The PriceMetrix team says this is an opportunity for fee-based advisors to charge a little more. Can't fault them there. As long as your clients see the value proposition, they'll probably be happy to pay it.

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