Headlines about fee compression may be true for some advisors and their vendors, but the reality is that a growing number of investment advisors are successfully increasing client fees from 10 to 25 basis points, industry insiders say.

“We have seen many clients increase their fees, in contrast to racing to be the lowest-cost wealth manager,” said Carolyn Armitage, managing director of Echelon Partners, the leading valuation firm in the country for advisory firms.  “When you lower your prices, it can imply that you’re really not providing all the services you promised or that you’re not that good.”

“Generally, fee increases are 25 basis points or less, which is significant when you consider the totality,” says Armitage, who creates strategic growth plans for a variety of firms who are new, have growing pains or have hit a plateau, as well as those who want to grow.

What’s the best way to justify a fee increase? Demonstrate and clearly communicate value, she said. “Pricing increases are often forgotten as a growth strategy. When you provide more services to your clients, you can charge more,” said Armitage.

What type of firm is successfully increasing fees? Not surprisingly, it is often firms that offer comprehensive financial planning and cater to clients who are moderately wealthy or of high net worth, with at least $1 million in investible assets. “If you’re offering more services than other advisors, clients are a little less price conscious because they’re getting more value,” Armitage said.

The trend in the advisory industry away from one-person shops and toward larger enterprise firms is also aiding fee increases. “A larger firm is able to charge more and offer more services, including a team for the client to work with, as opposed to one advisor in an office with an admin,” Armitage said. “Simply put, professionally run organizations that offer in-depth wealth and financial planning have the ability to charge more and be more profitable.”  

BNY Mellon Pershing, which serves some of the largest and most profitable advisor firms in the country, is also seeing more advisors successfully raise fees. 

“Our firms have been very successful at increasing prices and most firms tell us, ‘We should have done this a long time ago,’” Gabriel Garcia, managing director of Pershing's Advisor Solutions, told Financial Advisor magazine during the firm’s recent RIA Symposium outside Washington, D.C.

BNY Mellon Pershing has 750 RIA clients representing $600 billion total assets under management, or about $800 million in AUM per firm.

Industrywide, advisors fees average 1 percent of client assets under management, but can range from .75 percent to 1.25 percent, according to industry studies. Of course, it depends on a firm’s niche. For instance, ultra-high-net-worth clients are paying advisors an average of 50 to 60 basis points.

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