I was quoted in an article in GatekeeperIQ (A Financial Times Service) this week about a recent decision by Advisor Group to reduce the number of so-called “nuisance” fees it charges on mutual funds and on accounts with low balances and little activity. The firm also added access to many more no-load mutual funds.
This change comes at a time for the firm when it is digesting the addition of 1,400 advisors from its purchase of Woodbury Financial Services. The change, however, reflects more than just the desire to retain these advisors; it reflects the changing competitive landscape where firms are fighting hard to keep advisors.
Advisors don’t like it when their clients are assessed these types of fees; it can endanger the relationship. Would such fees in and of themselves cause an advisor to move? Probably not. But it’s part of the total package of working at a certain firm, and I think it’s smart that in this case Advisor Group sees the benefit of not imposing such fees over the potential loss of revenue from them.
Having said all this, and being fully in support of dropping such fees, I do have to say that on the flip side, such fees do help get rid of smaller, dormant accounts that are probably ones the advisor wants to lose in any case. They take up his/her time and are a distraction from other revenue-generating accounts.
Sponsors like Advisory Group would be best served by doing away with these types of fees on one hand, while also helping to educate advisors on how to segment clients and services and how to manage their businesses more efficiently on the other. This type of a dual strategy is a win-win for everyone – the client, the advisor and the firm.
