Wealth Management and Private Banking

Wealth Management and Private Banking



Expert: Christine Cantrell & Rob Thorpe, BMO Global Asset Management

Facilitator: Leigh Cotterill 

Key message 

This session was an opportunity to take a detailed look at one of the most prominent trends in wealth management at present - charging structures. Delegates were able to better understand from the discussion how clients react to different approaches to fees, where the value in the relationship exists and what clients have come to expect. 


  • The approximate distribution of wealth management fees lie between 0.4% and 0%.
  • Cost transparency, financial advice and client service all drive “client value”.
  • Firms need to consider the impact charging structures will have on business
  • Wealth managers can continue to deliver “client value” while maintaining
  • An augmented service approach should include a combination of financial advice and investment advice, at competitive industry
  • Wealth managers need to better understand client outcomes, through costs and service expectations, to demonstrate client 

Key themes 

From an industry perspective wealth managers are under pressure to consider their pricing model. While from a client perspective there are growing price pressures that the investment industry now faces. 

Referring to the FCA market study, “put simply, it’s not a cost issue, it’s now about providing value and transparency for the client.” What is more, the target value for clients has evolved and is often impacted by cyclical factors. 

When delegates discussed more candidly the minimum and maximum fee structures that wealth managers charge, the results varied wildly. The experts posed the questions: what is the total cost that you believe your clients will accept as advice and what are the pressure points? The answers showed the range anywhere from 40 basis points up to 200 basis points, breaking down as follows:

±    The adviser charge – up to 0.75%

±    The platform or transaction charge – up to 0.35%

±    The underlying investment charge – up to 0.90%

=    Total – up to 2.00% 

When considering the full spectrum from discretionary to systematic to entirely passive fund management, clients react to these different approaches in a number of ways. The FCA said it would introduce a responsibility for asset managers to consider the value for money that they deliver to investors. “There has been a surge in cost transparency. Even as recent as five years ago costs weren’t clear.” 

A telling statistic from the FCA report was that active funds for sale in the UK, on average, outperformed benchmarks before charges were deducted, but underperformed benchmarks after charges by about 60 basis points. In the UK the majority of the market is actively managed, approximately 74% compared to 23% passive investing. The ratio is lower for institutional clients than for the market overall, which is at 68% active investing. 

The conversation went on to further explore the different range of investing styles and the price that is paid for each. It was suggested by the experts that the four investment styles – Beta, Factor, Core+ and Alpha could attract prices anywhere from 0.1-0.2%, 0.2-0.4%, 0.35-0.5% and higher for each, respectively. 

However it was the understanding from a number of representatives who sought to summarise as “there is no space for smart alpha, it’s like an hour-glass, the squeezed middle.” Further, delegates were quick to point out that the argument for cost versus returns “all depends how good the manager is at delivering alpha and making decisions based on cost - even the most active managers do outperform.”

Meanwhile as wealth managers and clients are grappling with the wave of attention running through the pricing models of the industry there are wider disruptive trends omnipresent impacting client sentiment - from robo-advice, differentiation of service, competitor forces and rising regulatory costs. Part of the rigid pricing structures of alpha investors is that “there are barely any downward pressures on active management,” this will need to change. 


The discussion concluded by identifying a number of opportunities for financial institutions to explore in addressing perceived client value: 

  • Wealth managers should consider differentiating their fee budget accounting for both alpha and beta, splitting the investment fee into a proportion of low cost beta fee and an alpha fee across active
  • An “augmented service approach”, by combining financial advice and investment advice, at competitive industry cost will add value for
  • Further, it is increasingly prevalent for wealth managers to demonstrate value by indicating favourable client outcomes and providing transparent fee
  • Ultimately, for clients it is important to consider these changes in the context of wider industry disruptions such as automated advice pricing models, goals based advice, competitor forces and rising business costs of risk and regulation.