According to InvestmentNews, the financial advice industry is poised for a transformation in how advisors charge clients for services, though the specifics remain uncertain. As clients demand more personalized services, pricing models are expected to evolve beyond the traditional asset-based fee structure.
Tammy Robbins, Executive Vice President and Chief Business Development Officer at Cambridge Investment Research, believes the long-standing practice of charging a percentage of assets under management (AUM) is fading. Speaking at the Financial Services Institute's annual meeting in Dallas, Robbins told InvestmentNews that future pricing models will resemble a concierge service, incorporating a broader range of financial planning elements beyond portfolio management.
Currently, many independent advisors currently charge around 1 percent of AUM, while large brokerage firms typically charge between 0.8 percent and 1.2 percent. However, alternative pricing models—such as flat fees and subscription-based fees—are gaining traction. While these models have yet to see widespread adoption, industry professionals continue to explore their viability.
Robbins emphasized of understanding how the next generation of clients prefers to engage with financial services. "We must rethink our approach to servicing clients and build pricing structures accordingly," she noted.
Despite the potential for pricing shifts, the financial advisory sector remains strong. A robust stock market has bolstered advisor revenues, and the market for advisory firm acquisitions remains highly attractive. However, some industry leaders are concerned that future pricing changes could affect the profitability of broker-dealers and registered investment advisors (RIAs).
As the financial advice landscape evolves, firms that adapt to client needs and embrace flexible pricing structures will be best positioned for long-term success.
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