Taking a peek at what the competition is doing may have just become a little easier.
Hybrid advisers, registered representatives and their firms that use
Morningstar Advisor Workstation now have access to comparable fee- and commission-based industry pricing information.
The data are available as a result of a partnership that Morningstar Inc. entered into with PriceMetrix Inc. late last month.
PriceMetrix aggregates data for the retail brokerage industry. Last year, the firm collected data on 3 million investors, including more than 1 million fee-based accounts, 4 million transactional accounts, 500 million transactions and more than $900 billion in investment assets.
The deal with Morningstar makes two tools from PriceMetrix and the data from them available to financial advisers and broker-dealers, depending on whether they are commission- or fee-based. CommissionCheck and FeeCheck can help advisers and broker-dealers determine an average price range for different types of client transactions and managed-account fees.
As Morningstar and PriceMetrix representatives explained to me during a lengthy demonstration, the products help automate and clarify the pricing process, showing advisers where their fees or commission prices stand compared with their peers and the market.
It is important to understand this last part because it is what makes the products themselves and their integration into the process most useful.
Although firms sign on and partake of the two tools themselves, most firms also have agreed to send their own pricing data back automatically through the applications in return.
“The data [are made anonymous] and normalized,” said Greg Durand, head of marketing at PriceMetrix, adding that no firm is thereby giving up any trade secrets.
The shared pricing data could prove valuable to advisers because as
InvestmentNews reported in the
March 19 article “Cost of advice a key factor for budget-conscious clients,” some advisers are being asked to justify their fees for the first time.
PriceMetrix's products went live in Advisor Workstation as of an update last Monday, though there were no Morningstar clients using them as of that date.
Licenses are available on an enterprise-level subscription, meaning individual advisers would need to lobby their broker-dealers to get access, Mr. Durand said.
Twenty brokerage firms use the products, including a mix of independent firms, regionals and one wirehouse.
PriceMetrix plans to roll out a second wirehouse integration this summer, Mr. Durand said.
Nick VanDerSchie, who heads up the software group for Morningstar's captive-broker-dealer channel, said that though his firm isn't publishing the pricing for the tools, licenses are being sold at the broker-dealer level and that larger installations will receive volume discounts.
That said, fee-only or fee-based registered investment advisers shouldn't expect to see access to the product anytime soon unless they happen also to be affiliated with a broker-dealer using it or have access to it through Advisor Workstation.
“There are no immediate plans for integrating FeeCheck into
Morningstar Office,” said Mr. VanDerSchie, referring to Morningstar's popular RIA workstation product.
“It is challenging to bring this data in and normalize it, and it does not make economic sense for us to bring in the data from all the various RIAs we work with,” he said, adding that there's much greater variability in the size and business processes among RIAs than with broker-dealers.
In a nutshell, Advisor Workstation clients who add CommissionCheck or FeeCheck to their platforms will be able to access pricing data through a drop-down menu.
And FeeCheck users will be able to import their saved Advisor Workstation portfolios without having to re-enter client holdings information.
In an altruistic sense, the idea is that this will allow broker-dealers and their affiliated advisers to compare their fees both internally within their firm as well as with other advisers in the industry and determine a fair, appropriate price for executing a trade or managing a client's portfolio.
Although it might seem counterintuitive, PriceMetrix product manager Sarah McFarlane said that advisers most frequently compare fees being charged within their own firm.
The products allow advisers to be very granular in how they identify and compare account data and select between intuitive fields, including “premier advisory” or “discretionary,” as well as set the asset amount or type of fee (“one fee” or “fee by portfolio component.”)
Ultimately users come to the “Compare Me” field, where they choose between “U.S. Market” and “My Firm.”
Interestingly, PriceMetrix also publishes a lot of its data in industry reports.
As it wrote in its second annual Insights report, PriceMetrix found that overall growth for adviser revenue last year was weak, though there are signs of an improvement.
Principally, the firm found that advisers are starting to drop smaller households and attempting to add larger ones, and are adding accounts and assets to existing households by aggregating “held away” accounts.
For example, the number of households per adviser dropped by 8% from 2010 to 2011 or from 192 households per adviser in 2010 to 177 last year.
At the same time, average adviser revenue by household grew by 7% to $3,174 last year, from $2,954 per household in 2010, and 8% for households with more than one account, to $4,525, from $4,181.
Analysts are optimistic, though a bit circumspect, as to how heavily used the PriceMetrix tools might be among independent broker-dealers.
“I am sure [PriceMetrix's] comparative pricing data would be of great help to many advisers in fine-tuning their pricing strategy,” said Alois Pirker, research director with Aite Group LLC.
“At the very least, these services allow advisers and brokerage firms to price their services with strong benchmarking information. And perhaps some of the friction in the wheels of commerce will have been greased, and that is a good thing for everyone,” said analyst Doug Dannemiller of Dannemiller Analytics & Consulting LLC, who works with many broker-dealers.
Visit my blog entry, "
FeeCheck and CommissionCheck integrated into Morningstar Advisor Workstation" for easier-to-read versions of the PriceMetrix tool interfaces.
djanowski@investmentnews.com
