News

The Price of Financial Advice Gets a Trim

Originally published by Wall Street Journal on October 7, 2018 Read the original article.

The financial services industry will likely be shaken to its core when the deflationary trend fully matures.

The April 2018 Elliott Wave Theorist listed several expected changes and here is just one:

Hedge funds, mutual funds, money-market funds, managed accounts and brokerage accounts will go out of favor.

And the career outlook for financial advisers may not be too promising either.

Indeed, financial advisers are already facing challenges.

Read this excerpt from an Oct. 7 Wall Street Journal article titled “The Price of Financial Advice Is, Finally, Falling”:

Mutual-fund and index-fund fees keep falling. Trading is free, depending on where you do it. Even hedge funds have started to drop their notoriously high charges.

The only holdouts in the race to rock-bottom fees have been traditional investment advisers. Now that is starting to change.

Technology is reshaping the wealth-management industry, bringing down the cost of delivering advice and putting pressure on traditional fee models. At the same time, the massive, continuing transfer of wealth from baby boomers to their children means heirs are re-evaluating their financial relationships and putting advisers on the defensive.

The result: Some big players—such as Morgan Stanley MS 0.17% —have begun to trim fees for traditional advice. What’s more, some of those big names are launching automated systems called robo advisers, which offer investors simple guidance at extremely low prices. Vanguard Group charges 0.3% of assets annually for its robo adviser, for instance, while Charles Schwab Corp.’s SCHW +0.81% offering has no management fees.

“The tipping point is now,” says Jay Shah, chief executive of Personal Capital. “Advice is being delivered at less than 1%.”

That is a huge change. Currently, the bulk of investors with $1.5 million or less pay human advisers between 1% and 1.5% of their assets annually, according to Boston-based research firm Cerulli Associates.

Yes, EWI anticipates even bigger changes ahead for the financial services industry. Yet, deflation will affect businesses across the board.

You are encouraged to read the free report, “What You Need to Know NOW About Protecting Yourself from Deflation.”

Previous post:

Next post: