Some financial planners and advisors are just giving away their expertise.
These advisors are not always comfortable charging fees for advice on client assets held outside of their primary custodian because they say it does not constitute what they consider holistic financial planning.
“I did not consider that to be management,” said Sheryl Rowling, a registered investment advisor and partner with Moss Adams Wealth Advisors. “To charge them on a per consultation basis for that did not seem something justified or good will.”
Rowling changed her thinking two years ago, after her firm - it was Rowling, Dold & Associates before merging with Moss Adams in January - began using ByAllAccounts in 2008 to aggregate her clients’ assets.
Rowling is also chief executive officer of San Diego, Calif., based Total Rebalance Expert, which provides software re-balancing software for RIAs. Using Total Rebalance Expert and ByAllAccounts, the firm was able to get a full picture of its clients’ assets, manage and monitor them, and bill for the service.
“At a time when the market was declining and advisors were feeling the pinch, this was a way to add revenue without needing to find new clients,” Rowling said.
Despite the market downturn in 2008, Rowling’s old firm was able to increase its assets under management by 10% to 15%, by aggregating client accounts and billing for advice on held-away assets.
About half of advisors surveyed by account aggregator Woburn, Mass.-based ByAllAccounts said that they were confident about their ability to increase revenues for their firms this year. But they might forfeit as much as $118,000 in additional revenue because they do not charge their clients for advice on held-away assets. Tapping into that revenue stream is important for advisors, especially as the economy continues to recover from recent recession.
Held-away assets are accounts that do not reside with the advisor’s primary custodian and for which funds are not available for direct debit billing. They include employer-sponsored 401(k) accounts, overseas and private equity accounts. They might account for between 20% and 40% of an investor’s total assets.
“Many advisors are still monitoring or reporting on advice for those assets,” said Cynthia Stephens, director of marketing for ByAllAccounts.
Lost revenues can add up quickly. For example, the average retirement account has a $236,000 balance. If an advisor were to oversee 100 of those accounts outside the firm’s primary custodian, and bill at a rate of 50 basis points, it could mean $118,000 in additional revenue for the firm.
What is stopping advisors from bringing all that money into their firms? Some say: “I never thought about it,” or “I am not able to debit from a held-away account,” or “I’m not sure how to do it.”
ByAllAccounts rounded up these verbatim responses from 500 advisors in an online survey conducted in January and February. The company discussed its findings in a webinar Feb. 24.
“The survey uncovered some confusion among advisors on how to bill for advice on held-away assets,” Stephens said. Only 46% of advisors say they bill their clients for advice on held-away assets, even though 90% of respondents said that providing advice on all of a client’s financial assets is a very important part of doing holistic financial planning.
After examining the responses, the company asked advisors who said they billed on held-away assets to share some of their best tactics for tapping into that revenue source. Those advisors said they send invoices directly to clients. Some debit fees from a checking or other taxable accounts. Others got their clients to authorize them to deduct fees from accounts held at the primary custodian.
Access to client accounts raised another issue among advisors: how to avoid thorny issues of custody over clients’ assets while adequately collecting fees for services. Stephens said the company would delve into the issue of custody of assets in another webinar slated for late March.
