Growing Trend to Fee for Service Model

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A recent release from Investment Trends suggests ongoing growth occurred in the use of fee for service arrangements by financial advisers during 2008.

Headlining the findings was research that indicated 39 per cent of adviser revenue was derived from fee for service in 2008:

“Over 2008, planners as an industry derived 23% of their revenue from asset based fee for service models, plus another 16% from provision of services at a fixed or hourly rate,” said Investment Trends Principal, Mark Johnston. “Furthermore, since these figures reflect total revenue across both new and existing business, this means the proportion of new inflows being written under a fee for service arrangement is higher again,” said Mr Johnston.

…advisers expected revenue from fee for service models to rise to 47  per cent of their total revenue by 2011

Mr Johnston added that the research also suggested that advisers expected revenue from fee for service models to rise to 47  per cent of their total revenue by 2011.

The research found that advisers deriving a higher proportion of revenue from fee for service models often had similar characteristics:

“These planners tend to advise on a far wider range of investments – they are more likely to advise their clients on direct shares, gearing within super, listed investment companies, managed accounts, and exchange traded funds for example,” said Mr Johnston.

The Report found that independent advisers derived more revenue from fee for service models than aligned dealer groups, and twice as much as bank based advisers.