Advisor, KFI, Betterman discussed on Invest Like the Best


Financial advisor success podcasts as well. He was a very popular episode talking about the model and what he's built. I'm sure so so maybe level set by describing what those prevailing fees are today. And maybe where you see them going if it stays at that's at base fees or or other models. So a few things about adviser pricing models, and what we see today the classics are benchmark advisory fee is one percent that one percent. Kfi actually does still hold with sort of an asterisk the median fees. Really one percent on a one million dollar a kept. It is typically a graduated fee schedule advisors tend to have higher fees on smaller counts smaller fees on higher account. So usually actually see sort of a downward sloping line as your assets increase your fee goes down. So the low end under two hundred and fifty thousand dollar counts is actually typically more like one point three to one point five percents. And then by the time you get up to multimillion dollar accounts. It's usually about point six two point eight and then firms these days seem to be flattening at the top end to anywhere between about point two five point five percent as a fee by the time, you get up to working with five million ten million plus dollar accounts. And you know, if you're working with hundred millionaires, it's all to go. She it. So the one percent benchmark VIP still hold pretty well because advisors do have graduated fee schedules. And frankly, we tend to work with some fairly affluent folks in general when you look at sort of the the true revenue yield, which is the purest measure of. Of advisory firm fees, like just literally add up all the fees divide by all the assets rights, you implicitly taken account all the break points and graduate. If he schedules, and such you see an average revenue yield for advisory firms that sits right around seventy five basis points, and it's sort of fluctuated between bump seventy two and seventy eight basis points for ten fifteen plus years when you look at benchmarking data at it wobbles a little because the sampling near but really hasn't moved materially with a a very slight downward shifts in the past few years, which most of us who follow this data think is actually probably not fee, compression. It's just when we have graduated fee schedules. And you get basically a ten year bull market your average, speak keeps going down because all the client growth comes at the cheapest fee schedule at the top. So if that's the kind of prevailing true revenue yield for financial advisers, is that sustainable, I mean, the fact that it hasn't moved that much in fifteen years while the underlying say asset allocation has become increasingly KOMO. Commodity and a lot cheaper. You would think that that would respond at some point. Do you think it will and will the James's of the world start to win? Yes. And no, it will absolutely respond. It will not respond the way that people expect. And I've actually been writing about this pounding the table about this for basically ever since the robo advisors showed up, and it's it's only just recently starting to show up in the data itself. So here's the effect that actually happens. The presumption has been also there there's sort of two false presumptions in this idea that like advisory fees path to collapse. The first is meeting adviser fee was one percent meeting a robo advisor fee zero point two five percent all the advisers screwed because you're gonna have to come down to the robo peop-. Nobody actually knew if twenty-five bits was the right price point for robos, though, that was sort of a hypothesis that they just tested and launched a product, and you know, even profitable for the first five or ten years. That's okay. You've got venture capital money to burn through. But the trend that we've seen even in the robo space is that the average. Robo advisor fee has just gone up and up and up for the past seven years. Betterman started a fifteen to twenty five basis points, but then eventually they consolidated their fees at twenty five basis points, and they eliminated the lower price point well front started a twenty five basis points..

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