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Advisers handling loss of pricing leverage with ultra-wealthy clients


Advisers are beginning to use new strategies to better link value and price with their ultra-wealthy clients in the face of increasing price competition, according to a report from Family Office Exchange (FOX).

The 2016 FOX Value Price Study: The Critical Link in Ultra-Wealth Market shows advisers have lost at least some pricing power with prospects, as fees quoted to prospective clients have dropped 17 per cent since 2008 and 15 per cent since 2012.
Among current clients, fees have flattened-out—in large part due to the difficultly advisers encounter in articulating value.
In response, some advisers have begun utilising four strategies to better link value and price. Firstly, achieving sustainable business economics by thoroughly understanding value while making pricing and cost management everyone’s job at the firm.
Secondly, realigning price and value by making it easier for clients to see how competitor fees line up, and enabling a more effective method to match firm talent against client needs.
Thirdly, adapting resources to meet changing client needs by making it easier for clients to access the firm’s capabilities, and determining more efficient ways of bringing resources to bear on the client’s most pressing needs.
And finally, managing perception of value by better connecting client needs to the full value the firm may provide to them, and continually assessing whether their fees are aligned with that value.
“The 2016 FOX Value Price Study reveals that the state of the ultra-wealth business remains quite healthy, even in the face of market volatility and growing competitive intensity. However, we have uncovered mounting evidence that the prevailing pricing model employed by ultra-wealth advisers needs attention,” says David Toth, director of adviser research at Family Office Exchange.
“The value/price relationship deserves careful thought when considering what changes to make to the pricing model. This report takes a look at how some firms are taking on the challenge of finding better ways to demonstrate value to their clients while refining their pricing models.”

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