As investment management is increasingly outsourced and commoditized, advisors that want to justify their fees are offering clients additional services along the lines of more comprehensive financial planning, tax strategies and private banking services.
But offering comprehensive advice and other new services aren’t just keeping fees steady; in fact, advisors say those services are now the leading drivers for growth for their firms.
Each year, Pershing Advisor Solutions hosts what it calls the Elite Advisor Summit: a two-day, invitation-only event for the county’s top registered investment advisors who manage an average of $4.2 billion in client assets. Surveying advisors at this year’s summit, Pershing found that contrary to other parts of the financial services world, most advisors were not feeling pressure to reduce their fees.
More than half (58 percent) of the RIAs said they don’t feel increased pressure from clients to cut their fees. The majority of advisors (84 percent) also said they made no changes to pricing in 2017. Last year, of the advisors who altered their fees: 10 percent said they increased them; only 6 percent lowered their fees.
The RIAs that maintained their fees said they kept a competitive edge by offering new and value-added services.
Out of the top three areas driving business growth right now, the number one driver was tax planning (74 percent) followed by both alternative and philanthropic investments (tied at 61 percent) and private banking solutions (52 percent), according to the RIA respondents.
Gabriel Garcia, managing director at BNY Mellon’s Pershing Advisor Solutions, said in a statement that the findings were consistent with previous studies and conversations with Pershing’s clients.
“Our experience is that those advisors who demonstrate value beyond asset management and basic investment counseling not only maintain prices but are also better positioned to drive growth in the long term,” he said.
The survey also found that using branding and marketing to differentiate an advisory business is also paramount; 29 percent of respondents said developing meaningful and impactful strategies would be their biggest growth driver.
Hiring talent amidst a dearth of young advisors entering the industry is the biggest challenge advisors (36 percent) face in 2018, according to the survey.
“Talent shortage is the single biggest threat to our industry,” said Mark Tibergien, the CEO of Pershing Advisor Solutions.