N

E

S

W

FEE-BASED

ADVICE-BASED

DISCOVERING AN

ADVISORY FEE MODEL

THAT REFLECTS YOUR TRUE VALUE

For generations our industry has managed to thoroughly confuse

consumers about who we are, what we do and how we

get paid for doing it.

The dizzying array of titles and designations we use continues to expand.

IDENTITY CRISIS WHAT’S IN A NAME?

CFA®

CFS

CIMA®

CEBC

CPCU®Independent

Advisor

Private Wealth

Manager

CPA

CFP®

FinancialPlanner

CLU®

FinancialAdvisor RHU

CIC

PFSSM

AssetManager

CHFC®

WealthAdvisor

$

$

$

$

$$

$

$

$

$

$

$

$

$

$

$$

$

Further complicating our identity, we’re the only profession that di�erentiates our services by how we charge for them.

› Fee-based financial advisor› Fee-only financial advisor› Commission-based financial advisor

$ $

An alarming 24% of clients don’t know how they pay their advisor, while another 14% don’t think their primary advisor receives any compensation for the work they do at all.

Despite ongoing education and disclosure e�orts, many consumers remain uninformed about how their advisors are compensated.1

Discussing your fee model with your clients

24%

33%

27%

19%

9%

I am not sure how my provider is compensated

I pay my provider a retainerfee for a set amount

I pay my provider a percentagefee based on my level of assets

My provider is paid each time I make a transaction

I pay my provider an hourly fee

14%

38%

I do not compensatemy provider

of mass a�uent consumers are eitherwrong or confused

HOW DOESYOUR ADVISOR

GET PAID?

The debate about compensation among advisors and in the trade media suggests that our industry is at a crossroads. Can advisors continue to justify an ongoing AUM fee when the cost for investment selection, allocation and rebalancing has declined dramatically, thanks to automation?

So, are we at a crossroads?

89% of the advisors we surveyed are currently using some form of an AUM model, with 32% basing their pricing solely on AUM.2

AUM +QUARTERLY RETAINERS

9%

AUM +COMMISSIONS

22%

AUM +UP-FRONT PLANNING FEE

26%

AUM ONLY

32%

ONGOINGLOWER COSTAUTOMATION

AUM FEES

QUARTERLY RETAINERS ONLY

4%OTHER

4%HOURLY

1 %

MONTHLY RETAINER FEES

(AUTOMATED BILL PAY

OR CREDIT CARD)1 %

Where is the pressure on investor fees coming from? Feeling the Pressure

CHANGE!

Nice tohave

No

Yes

Musthave

Unimportant

85%

Despite all of the media coverage, only 15% of advisors are feeling pressure to lower their advisory fees as a result of robo-advisor competition.2

GENERATIONAL

ROBO-ADVISORS

15%

CLIENT RETENTION! FEES!

A�uent Gen XersA�uent millennials

With many of your boomer clients entering into retirement, only 37% of millennials and 27% of Gen Xers view financial advisors as a must-have.3

25%

13%50%

27%

37% 48%

I haven’t received

questions from either

Existingclients

Both about the same

New prospects

46%

35%

12%

7%

FEES

54% of respondents say they receive questions from existing clients and new prospects about fees.2

CURRENT CLIENTS/PROSPECTS

SMALLER ACCOUNTS

Use the same amount of resources on small and

larger clients.

Other

3%

12%

11%

74%

AUM fee with retainer or robo-platform

Monthly or quarterly retainer

74% of advisors use the same amount of resources on small clients as they do on larger clients. Of those who have changed their fee model for smaller accounts, 23% use a monthly or quarterly retainer, or AUM fee with retainer or robo-platform.

ROBO-ADVISORS

ADVISOR

INFORMED INVESTORS

VALIDATORS

REGULATION

TRANSPARENCY

GEN X/Y INVESTORS

With increased pressures,

or is there a better model for you and your clients?

CHANGE/MENU

25 BPSASSET MGMT

RETAINER/FEE FOR SERVICE

FINANCIAL PLANNING

OTHER ADVICE

SERVICES

STATUS QUO

100 BPS ? FEES ?

can you continue with the status quo

FEE MODEL GOOD FOR

Brokerage/commission› Advisors who focus on smaller accounts› Advisors include product (insurance)

AUM

› Advisors with a legacy AUM business› Advisors with a clear value proposition

who want simplicity› Investment advisors› Lifestyle advisors

Retainer/fee for service›

› Larger advisors for their smaller accounts› Advisors focused on Gen X/Gen Y

Hourly›

› Advisors who are part of a larger firm (e.g., trust, legal or CPA firm)

Menu› Advisors using passive investments› Larger advisors with deep planning services

Household income + net worth› Advisors providing broad wealth

management services

Financial planning (as a separate fee)›

› Planning firms with financial planning integral to the value proposition

Assets under advisement (as a separate fee)

› Advisors for ultra high net worth as long as they’re providing performance and advice

A Guideline for Fee Modeling

As you go through the process, use this guide for fee arrangements that may work in di�erent situations.

ACTION STEPSThe road map to advice-based fees

3

1

2

4

Revisit your value proposition Your value proposition is the basis of your firm’s

business model. And increasingly, the evidence

suggests it should be based on meeting clients’

goals through financial planning and advice.

Consider why your clients hired you. Clarify and

update your value story.

Continue moving from commission to advice-based If the bulk of your compensation is from

commissions, we encourage you to

think about adopting an advice-based

model. Whether it’s an asset-based fee,

retainer or a hybrid pricing strategy,

transitioning your business model will

require added diligence and patience in

the short run, but greater transparency

and sustainability over time.

Scrutinize your costs and profitability Even if you don’t charge an hourly fee for your services,

you should know what your time is worth and how

much time it takes to perform various tasks — from

financial planning to investment strategy development.

Segment your clients and target marketsWe strongly urge advisors to consider

most advisors charge the same fees for

all clients no matter what the service or

complexity of the client account.

7Implement your fee structure and migrate your clients Once you’ve segmented your client base

and determined how your pricing strategy

will change, you may choose to implement

the plan in stages.

› Create a disciplined migration plan

› Anticipate client objections

› Review with clients before implementing

› Communicate well

6

Adapt your fee structure (if necessary)Having accomplished steps one to five, you

should arrive at a pricing strategy that makes

sense for your business. You will have assessed

the competitive environment, confirmed your value

story and considered the risks and opportunities

associated with your decision.

5

Assess your technology For advisors considering a pricing

change, technology must factor into

your decision early. Evaluate systems

to improve advisor productivity, support

pricing strategies and reduce processes

that are not value added. Automate

as much as you can, including fee

collection and outsource everything

except your client relationship and value

proposition.

ACTION STEPS(continued)

Contact an SEI representative for more information, insight and guidance about things you can do to maximize your resources and spend more time with clients.

Visit seic.com/advisorsor call 888-734-2679.

1 SEI Consumer research, in partnership with Phoenix Marketing International, April 2015, n=539.2 SEI Survey, Advisor Fees, August 2015, n=775.3 LinkedIn research, “Winning A�uent Millennials: How this New Power Persona is Reshaping the Finance Industry,” September 2015.

Information provided by SEI Advisor Network, a strategic business unit of SEI. Services provided by SEI Investments Management Corporation (SIMC), a wholly owned subsidiary of SEI.