A big firm’s come up with a way to help its top advisors dump low-asset clients without alienating their affections.
A big firm’s come up with a way to help its top advisors dump low-asset clients without alienating their affections.
Why the sudden interest?
With the full implementation of CRM2 scheduled for July 2016 the issue of trailer fees have been forefront in industry discussions. Will they or won’t they be banned is the question on the minds of many advisors.
In mid-March WP ran an article that quoted one Ontario advisor who projected she’d have to cut one-third of her 500 clients because they wouldn’t want to pay the yearly bill replacing embedded commissions.
Ouch.
So, what do you do when you have a client that’s unprofitable but you don’t want to simply cast them off?
Fidelity’s clearing business in the U.S. has a solution.
Partnering with registered investment advisor First Point Financial, Fidelity is offering advisors with custody assets held on its platform the opportunity to assess whether or not individual clients are a good match for their practice.
“We have observed from practice management that one of the top three issues advisers say is 'I don't know how to serve this client efficiently,'” said David Canter, executive vice president of practice management and consulting at Fidelity Clearing and Custody.
#pb#
So, they’ve brought in First Point to make this assessment and when a client is deemed a poor fit, the advisor is free to refer that client to First Point in return for an ongoing 35 basis points on the annual revenue derived from assets moved over, substantially higher than what First Point pays to other advisors making referrals.
“Those clients that are below the minimum, what do they do with them? They typically refer them away,” Marty Bicknell, chief executive of Mariner Holdings, the parent of First Point told the Investment News. “This gives advisory firms the ability to have incremental revenue stream from something they're already doing.”
Here in Canada the options that exist for advisors such as the one mentioned in the beginning of this article are relatively few. It’s possible that robo-advisors could breach the gap but many advisors likely would bristle at the thought of opening Pandora’s Box. As we move closer to July 2016 this problem is only going to become more acute.
Solutions? We’d love to hear them.
Why the sudden interest?
With the full implementation of CRM2 scheduled for July 2016 the issue of trailer fees have been forefront in industry discussions. Will they or won’t they be banned is the question on the minds of many advisors.
In mid-March WP ran an article that quoted one Ontario advisor who projected she’d have to cut one-third of her 500 clients because they wouldn’t want to pay the yearly bill replacing embedded commissions.
Ouch.
So, what do you do when you have a client that’s unprofitable but you don’t want to simply cast them off?
Fidelity’s clearing business in the U.S. has a solution.
Partnering with registered investment advisor First Point Financial, Fidelity is offering advisors with custody assets held on its platform the opportunity to assess whether or not individual clients are a good match for their practice.
“We have observed from practice management that one of the top three issues advisers say is 'I don't know how to serve this client efficiently,'” said David Canter, executive vice president of practice management and consulting at Fidelity Clearing and Custody.
#pb#
So, they’ve brought in First Point to make this assessment and when a client is deemed a poor fit, the advisor is free to refer that client to First Point in return for an ongoing 35 basis points on the annual revenue derived from assets moved over, substantially higher than what First Point pays to other advisors making referrals.
“Those clients that are below the minimum, what do they do with them? They typically refer them away,” Marty Bicknell, chief executive of Mariner Holdings, the parent of First Point told the Investment News. “This gives advisory firms the ability to have incremental revenue stream from something they're already doing.”
Here in Canada the options that exist for advisors such as the one mentioned in the beginning of this article are relatively few. It’s possible that robo-advisors could breach the gap but many advisors likely would bristle at the thought of opening Pandora’s Box. As we move closer to July 2016 this problem is only going to become more acute.
Solutions? We’d love to hear them.
