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Pershing: wealth managers must review pricing structures
by Elsa Buchanan on Oct 22, 2013 at 12:25
Pershing has urged wealth managers to review their price structures, after research found that fewer than 20% of firms use the cost of providing services as the foundation for determining price.
Presented during Pershing's recent client advisory council in the Cotswolds, the research showed that many companies are moving to a fee structure based on percentage of assets in the light of the retail distribution review (RDR), but fewer companies apply a minimum to ensure protection in down markets.
Commenting on the findings, Pershing director Gabriel Garcia said: ‘Achieving sustainable growth and profitability in both strong and more challenging markets requires a fresh look at pricing.'
While he understands tackling a pricing transition can be demanding, and many firms often find discussing fees with clients an uncomfortable experience, he urged UK wealth managers and advisers to adapt to the post-RDR environment, especially as fees are under pressure and competition is high for the most profitable clients.
'When establishing a pricing framework it is vital to tailor it to individual clients’ needs and to consider not only your current business model, but more importantly, where you want to be in years to come.
‘A thorough transition plan, detailed cost analysis, clear profit targets and communication of the value proposition to clients are all key parts of the process,’ he said.
Garcia also encouraged wealth managers to ‘carefully consider how clients are likely to react’, and ‘whether to apply the change to all or future clients only’.
Pershing’s client advisory councils are part of its practice management programme, which provides advice to its financial planning and wealth management clients.
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