Fee-based model complicates business, says advisor

Advisor predicts only a handful of Canadian advisors will make the switch, despite increased regulation.

By: Mark David

A top advisor believes that only a small fraction of advisors would be willing to switch to the fee-based model, despite the controversial CRM reforms set to increase reporting disclosure requirements.

Nathan Leibowitz of Assante Wealth Management in Montreal predicts that “around 20 per cent” of advisors would be willing to transfer their clients to fees, rather than opt for full transactional disclosure. He attributes this to the fact that that the fee-based structure requires a complete overhaul of a firm’s business practice.

“I think that a lot of practices are fee-disclosed already, or moving in that direction,” says Leibowitz, who recently made WP’s Top 50 Advisors in Canada list. “The clients understand what they’re paying for and what value they’re getting.”

Leibowitz views the fee-based system as one that could complicate things for advisors, whereas the fee-disclosed model allows advisors to go about their business as usual, while ensuring clients understand what they are paying for.

 “A fee-based practice is a basically a whole new business model,” he says. “But (with the fee-disclosed model), you’re keeping the same traditional business model, except you’re making them (clients) aware of what you’re charging.”

Looking ahead, Leibowitz believes there may be discrepancy across the industry over what the term 'fee disclosure' actually means, especially regarding what needs to be disclosed to clients and what does not. 

“The only thing that may change is what “fee disclosure” means,” he says. “This would include what the advisor is being paid, what the investor is actually paying, transaction costs, and so on.”

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