RJ and Makay

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Morningstar announced last week that it would begin to include advisor fee and commission data from PriceMetrix Inc. in its advisor workstation platform.  The news was generally received well by advisors though many were concerned that greater transparency would lead to lowball pricing.  Detailed pricing information provides insights into advisor attributes that clients require in a business relationship.

When it comes to pricing, fee-based financial advisors simply aren't charging enough, suggest data from wealth management software firm PriceMetrix. The company drew this conclusion after analyzing 380 million transactions executed between 2007 and 2010 in 1 million fee-based accounts and 4 million transactional accounts.

“The most surprising thing to us was the wide range of prices charged for similar relationships on similar-sized fee-based accounts,” remarks PriceMetrix CEO Doug Trott. Fees progressively declined from an average of 1.17% on accounts ranging between $1 million and $2 million to 0.63% on accounts worth more than $5 million, Trott says. For accounts between $250,000 and $500,000, the lowest quartile of the advisors charged an average of 81 basis points while the highest quartile charged 208 basis points.