Additionally, fee-based advisers’ assets under management, returns and quality of clients are considerably better, according to the report, “Transitioning to Fee: Don’t Switch Tracks Without Knowing the Facts.” Total assets under management in fee-based accounts in 2012 were 46% higher than transactional accounts, with fee-based accounts generating an average of $2,900 in revenue, compared with $870 in transactional accounts.
Households with at least one fee-based account generate a return on assets 40 to 70 basis points higher than households that are purely transactional.
“Our report demonstrates the pace at which advisers choose to transition to fee-based accounts has a meaningful impact on their results, not only in terms of assets and revenue growth but also with respect to the quality of the adviser’s book of business,” said Doug Trott, president and CEO of PriceMetrix.
The number of fee-based advisers has grown from 21% in 2009 to 28% in 2012, the PriceMetrix report said. Further, 91% of all advisers have at least one fee account in their book of business. But even for those advisers who are transitioning to fee-only accounts, only 1% have 90% or more of their client assets in fee accounts.
Likewise, customers are holding a mix of fee- and commission-based accounts. These so-called hybrid households, in which a resident holds at least one fee-based account and one transactional account, have grown 41% since 2009.
“Although advisers often think of themselves as either fee-based or transactional, the reality is that most advisers are a little of both,” Trott said. While the trend toward fee-based accounts cannot be denied, the fact of the matter is that today, most clients want a combination of the two, he added.
PriceMetrix said its report was based on retail brokerage data representing 3.2 million investors conducting 500 million transactions in portfolios totaling $900 billion, in a combination of one million fee-based accounts and four million transactional accounts.
More information about the report is available here: http://www.pricemetrix.com/transitioning-to-fee/