Been there, done that: an advisor’s timeline for moving clients to fees

Been there, done that: an advisor’s timeline for moving clients to fees

Been there, done that: an advisor’s timeline for moving clients to fees

When it comes to mutual funds sold with loads, advisors are using more front-end opposed to DSC; stats from IFIC back this up. In 2007, 58 per cent of the funds sold were done with the DSC option compared to just 37 per cent in 2014.

So, how long would it take to make this move today? Not nearly as long according to DeGoey.

“I think it will take a year or two less, so two to four years. Most mutual fund advisors have been using front-end zero for some time now and for the most part there’s less DSC on the books than when I made the decision to move in 1999.”

In addition to having the DSC bugaboo to overcome, DeGoey mentions two other problems that hampered his ability to move clients.

First, at the time no one else was moving clients from the one business model (commission-based) to the other (fee-based) so it was a difficult task simply convincing clients to start paying a bill, which was exacerbated by the fact the markets had just been through a significant correction in 2000-2001, making it incredibly difficult to ask this of clients when they’ve just seen their portfolios shredded.

“In 2002, I’d guess that approximately 5 per cent of advisors charged asset based fees.  Today that number is likely closer to 35 per cent,” says DeGoey.

So, for the remaining 65 percent contemplating a move, remember that others like DeGoey have paved the way for an easier transition. 

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