Wealth advice fees in transition as HNWs want fixed-fee structures

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Wealth advice fees in transition as HNWs want fixed-fee structures

Advice fees are undergoing an evolution as high net-worth clients have increasingly opted for fixed-fee structures, Sebastian Dovey has said.

The managing partner of Scorpio Partnership said traditional models meant that HNWs tended to pay a percentage fee based on assets under advice, but recently they had been demanding to see more value for money, putting more pressure on advisers to offer upfront, fixed-fee structures.

He said: “The traditional percentage of assets model means that the client is effectively compensating their financial provider for the value they bring to the relationship, rather than the value they receive.

“Understandably, they want more control and transparency by engaging with fee structures that more closely reflect their engagement with their financial provider”.

In a report, Recalibrating Value in Wealth, part of the Futurewealth series published jointly by NPG Wealth Management, SEI and Scorpio Partnership, the interplay between value and relationship management within the wealth management model was highlighted.

It found that 33 per cent of HNWs paid a percentage fee based on the assets under advice but 31 per cent would like to continue paying in this manner.

Similarly, the use of transactional charges looked set to drop from 16 per cent of HNWs paying these to 13 per cent in the future.

By contrast, the report said that fixed fees were rising in popularity, from 20 per cent of UK wealthy individuals using such fee structures now, to 23 per cent in the future.

The research was based on the views of 3,113 investors globally, with an average net worth of $2.7m (£1.79m)

Brett Williams, managing director, SEI Wealth Platform, UK Private Banking, said: “The big question is whether wealth management firms will be ready for this predicted shift in behaviour. Some have failed to invest in their technology over the years, meaning they will be unprepared for the necessary changes that will need to be made to their systems.”

Adviser view

Lee Robertson, founder of London-based Investment Quorum, said: “I read some of this report and was surprised that some people have never checked the fees they have paid.

“I have never had a client who says ‘just charge me, I don’t care what it costs’. As an industry we have been shocking at disclosing charges, so we like our HNW clients to see what we are charging and what they are paying for.

“When clients do look at their charges, you want to be able to show that you have delivered value for money and show exactly to the client how the costs break down.”