How global asset managers fight fee pressure

Clients are paying advisors in unique ways, providing evidence that fee cuts aren’t the only way to cope with pricing pressure, and that creative thinking pays off.

Research by Boston-based Cerulli Associates shows an uptick in different fee types and payment methods by U.S. clients. These include subscriptions, hourly or annual fees, and fee combinations that accommodate unique client situations.

The move to greater customization has been seen as many firms switch to fee-based. In fact, the fastest growing Canadian financial services companies, as reported by Canadian Business, include asset managers that offer separately managed accounts.

Those in need of innovation inspiration might want to look far afield to global asset managers. Cerulli research finds that European managers have shown innovation by marketing on social media instead of through traditional channels; providing tailored value to institutional clients, as with a bespoke index or investment strategy; and cutting supplier costs. One U.K. manager has created an innovation committee to generate ideas to increase margins.

In Asia, asset managers mainly respond to fee pressure by cutting costs or developing higher-fee products or services, the release said.

What they aren’t doing is launching passive funds.

In the release, Cerulli said the dearth of new passive launches in Asia could be because active managers have conviction in their investment philosophies or because the fees for passive products aren’t worth the effort.

Staff

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