Wealthy clients add fee accounts

By Staff | May 8, 2013 | Last updated on May 8, 2013
2 min read

High-net-worth (HNW) clients are adding fee accounts more often than other clients and are seeking fair fees but not necessarily the lowest ones, finds a PriceMetrix study.

Read: Wealthy clients have debt, too

Looking at product mix, 92% of HNW households hold transactional accounts compared to 85% of households with assets between $250,000 and $500,000. They’re also more likely to hold fee accounts — 51% compared to 36%. And almost half of HNW households hold both fee and transactional accounts. Interestingly, wealthy clients are less likely to hold retirement accounts — 69% compared to 75%.

Some believe HNW clients tend to pay lower fees (on a percentage basis), says PriceMetrix. This is true, but it’s not the complete picture. The median Revenue on Assets (RoA) for fee-based accounts for wealthier clients is 0.76%.

Read: 10 questions to ask biz owner clients

But the range of fees is wide. A quarter of rich clients pay 0.45% or less in RoA, while one-in-four pays 1.06% or more. In fact, one-in-ten clients pays 1.45%.

The same trends are present among transactional accounts. The median discount from scheduled commissions is 25%. One-in-four HNW investors, though, receives no discount at all. On the other side of the scale, one-in-four gets a 50% discount or more.

Read: Applying OAS for rich clients

The study also found small households don’t always hold the potential to become big ones. Only 3% of households with less than $500,000 in assets become HNW clients within five years. And 7% of households with less than $1 million become wealthy investors within that time.

“Advisors seeking to grow should concentrate on finding, not manufacturing large clients,” says Doug Trott, president and CEO of PriceMetrix. “The majority of high-net-worth clients were high-net-worth from the beginning of their relationships with their advisors.”

And to attract rich clients, advisors need to make room in their books — they should keep the percentage of small households at less than 20%, says PriceMetrix.

Read: 9 ways to generate new clients

Also, both overpricing and underpricing results in less success with HNWs.

“Deeply discounted prices and a high concentration of small households reduce the likelihood of attracting high-net-worth households,” says Trott.

Additional findings include:

  • HNWs have 44% of invested assets in equities, compared to 37% for households between $250,000 and $500,000;
  • HNWs have 17% of assets invested in mutual funds (compared to 33% of other households); and 28% in fixed income (compared to 15%).
Advisor.ca staff


The staff of Advisor.ca have been covering news for financial advisors since 1998.