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Family Offices, Wealth Houses Should Re-Think Fee Structures - Study

Tom Burroughes

9 February 2021

(Repeat of a news item that ran on sister news service Family Wealth Report; we hope readers of this news service find the data of value, since the workings of the North American family office market are often replicated in other parts of the world.)

There is a significant opportunity for multi-family offices and wealth management firms to re-think their fee structures, the authors of a new report delving into these entities’ charging structures find.

The study from .

“Pricing speaks volumes, serves to align your firm with your client, and helps clients understand how their fees directly relate to the valuable services you deliver. Fees also have a direct bearing on your top and bottom line, allowing you to be a sustainable business. We believe that firms have no greater control over their businesses than how they charge fees,” Tom Livergood, founder and CEO of The Family Wealth Alliance and author of the report, said. 

Among its observations, the report said that “asset-based fees” are still largely the methodology of choice in the family wealth space. Some 93 per cent used asset-based fees only; 38.9 per cent used asset-based fees and retainer fees; 36 per cent said they used retainer fees only and 25.3 per cent said they used project-based fees only; 24.3 per cent used asset-based fees only and another method; 14.7 per cent used retainer fees and another method; and 11.6 per cent used hourly fees only.

Asked if they have margin pressures, 58 per cent of all firms (MFOs and wealth managers) said they “somewhat agree” that they do; 6.2 per cent “strongly agree”; 18.5 per cent "somewhat disagree" and 17.3 per cent strongly disagree. Among MFOs, 56.4 per cent “somewhat agree”; that figure goes up for wealth managers, at 5.95 per cent. 

The authors of the study said that organisations don’t recalculate fees very often. 

“Surprisingly, we found 39 per cent of MFOs and 56 per cent of WMs recalculate their fees just every five years (or even less frequently). And only 20 per cent of MFOs and 27 per cent of WMs review their fees every year. We believe this represents a significant opportunity for many firms to re-visit, re-align, and even adjust their fees upwards, which could substantially impact their bottom lines. Remember: Clients appreciate your need to stay profitable,” it said.