Warning signs for RIA pricing
At first glance, with RIAs reporting record client growth and healthy gains in AUM and revenue, pricing does not appear to be a major concern.
But appearances may be deceiving. The fact that median fees haven't changed in at least six years — and that advisors say they have no plans for price increases for the next two years — may indeed be troubling, according to TD Ameritrade's 2018 FA Insight Study of Advisory Firms.
What's more, the report shows a 9% decline in median revenue collected on assets since 2015, an indication that RIAs may in fact be discounting from their fee schedule more than they let on.
The study also points out that the lack of upward price movement "may be contributing to record numbers of new clients who may not have considered an advisory firm if fees were higher."
Nonetheless, FA Insights asserts that "the warning signs are strong enough to justify that firm owners monitor pricing more carefully in the months and years ahead."
When it comes to pricing, the study concludes, the big question is whether current levels will be sufficient to sustain profitable growth.