Financial advisors’ fears that they will lose clients if they switch pricing models are unfounded, according to research by SEI Advisor Network released Monday.
A survey of 775 advisors and 539 investors shows that advisors kept 90 percent of their clients when they switched their pricing models, according to the survey, "Fees at a Crossroads: Adopting an Advisory Fee Model that Reflects Your True Value."
Despite all of the recent talk about fees and transparency, one-fourth of investors still do not understand how their advisors are compensated, says SEI.
Sixty-one percent of advisors have not changed their fee structure in more than five years, the survey says. Of those who have changed shifted from commission-based to an assets-under-management model, or added planning fees or retainers.
“Avoiding the fees discussion does not benefit advisors or their clients,” says John Anderson, managing director and head of practice management services for the SEI Advisor Network. “We believe that today’s investors want advice and guidance to manage their increasingly complex financial lives, but they also need to understand their fee structures.
“By keeping the fee and pressure-point dialogue open, it will allow advisors to clearly articulate a value proposition that clients understand and are willing to pay for. This is particularly true given the growth of cheaper online but less-personalized advice,” he says.