A study of advisors to wealthy individuals by Family Office Exchange suggests pricing power is becoming harder to maintain in a competitive environment.

Some advisors to wealthy advisors have lost some pricing power with prospects, with fees for prospective clients falling by 17 per cent since 2008, according to Family Office Exchange, a report that follows hard on the heels of its survey of remuneration trends earlier this week (see here).

Forward-thinking advisors are beginning to use to better link value and price with their ultra-wealthy clients in the face of increasing price competition, FOX said. The findings come from its recently-released report, 2016 FOX Value Price Study: The Critical Link in Ultra-Wealth Market.

Among current clients, fees have flattened-out, often because advisors have a hard time explaining their value, the report from the Chicago-headquartered organization said. As a result, some of them have started to use four strategies to forge a closer link between value and price. These are:

-- Mastering Underlying Economics: Achieving sustainable business economics by thoroughly understanding value while making pricing and cost management everyone’s job at the firm; 
-- Realigning Price and Value: Making it easier for clients to see how competitor fees line up, and enabling a more effective method to match firm talent against client needs; 
-- Adapting Resources to Meet Changing Client Needs: Making it easier for clients to access the firm’s capabilities, and determining more efficient ways of bringing resources to bear on the client’s most pressing needs; and 
-- Managing Perception of Value: Better connecting client needs to the full value the firm may provide to them, and continually assessing whether their fees are aligned with that value

“The 2016 FOX Value Price Study reveals that the state of the ultra-wealth business remains quite healthy, even in the face of market volatility and growing competitive intensity. However, we have uncovered mounting evidence that the prevailing pricing model employed by ultra-wealth advisors needs attention,” David Toth, director of advisor research at Family Office Exchange, said.

“The value/price relationship deserves careful thought when considering what changes to make to the pricing model. This report takes a look at how some firms are taking on the challenge of finding better ways to demonstrate value to their clients while refining their pricing models,” Toth said.