Although many who seek investment advice and wealth management services may be tempted to steer their funds towards big names, traditionally associated as discount brokerages, fees offered by firms like Fidelity, BlackRock, and Merrill Lynch are increasingly viewed as incongruous, particularly given the amount of service provided, especially for smaller accounts.  Add the emergence of start-ups that will offer their services for only 0.15% to 0.50% annually, and fees ranging between 0.5% to 1% seem even more unreasonable.  The current market for investment advisers can be reflected by this stark contrast between large institutional firms with in-person service and higher fees, and low fees for largely impersonal, automated service.  While larger firms seemingly cannot continue charging the fees they currently reap, the much bigger overhead costs they face make it difficult to offer heavy discounts to their fees.  In contrast, start-ups like FutureAdvisor, Betterment, and Wealthfront are at a disadvantage in terms of brand recognition, and are relying (at least now) on a younger, technology-confident client base.

See Ron Lieber, “An Emerging Price War in the World of Investment Advice,” NYTimes.com (Aug. 22, 2014).

Posted by Morgan Yuan, Esq., Associate Editor, Wealth Strategies Journal.