Fees for investment consulting

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MissCleo

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My firm is bidding a 30 mm plan, and I was curious what a reasonable fee would be. 5 basis points (15 grand)? 10 basis points (30 grand a year)? 25 basis points (75 grand a year)?
 
It seems like this would depend on many factors. What do you normally charge?
 
Small shop 4 people. Small fund 6 managers. Normally we charge 5 bps for 100mm+, but I think that’s too low.
 
End investor? The total fee would just be our 5 bps, plus 85 bps or whatever the AM firms are charging
 
MissCleo Wrote:
——————————————————-
> Small shop 4 people. Small fund 6 managers.
> Normally we charge 5 bps for 100mm+, but I think
> that’s too low.
Too low? You are giving yourselves away. Start with 125bps and work your way down. For our Ultra-High-net-worth client, 50million plus, we start at 0.65% (advisory fee).
 
The places I know charge between 125bps (high brand recognition) to 85bps (low brand recognition). But I really think it depends primarily on the kind of service (active, passive, emerging, developed, etc.) and your own cost basis (for own or purchased systems, research, banking, legal). I have recently heard some people switch to charging by the minute rather then on AuM basis.
 
ws Wrote:
——————————————————-
> MissCleo Wrote:
> ————————————————–
> —–
> > Small shop 4 people. Small fund 6 managers.
> > Normally we charge 5 bps for 100mm+, but I
> think
> > that’s too low.
>
> Too low? You are giving yourselves away. Start
> with 125bps and work your way down. For our
> Ultra-High-net-worth client, 50million plus, we
> start at 0.65% (advisory fee).
I think 5 is way too low also, for mostly equities I think the “market price” is around .65%.
 
Really? Well I mean BB firms UBS/JPM/MS/ Goldman are sniffing at this account, but I figure they wouldn’t do it but for 100-200k. At 20k it looks fishy if the board turns us down.
 
Unheard of to charge 100bps or even 50bps on insitutional in IC (generally .5-7bps)
Come on guys, Calpers with 175bil AUM, do you think they are paying 175mil/yr in consulting fees? If so IC firms must be flushed with cash. If I had to guess they are prob paying 2-5mil/yr for consulting fees that includes there extensive RE/PE programs.
 
MissCleo Wrote:
——————————————————-
> Really? Well I mean BB firms UBS/JPM/MS/ Goldman
> are sniffing at this account, but I figure they
> wouldn’t do it but for 100-200k. At 20k it looks
> fishy if the board turns us down.
How badly do you want the account? In case you want to get a foot into the door, fine, buy the business. I do that when I know I can earn more from the account at a later time. However, I prefer to convince with quality and trustworthiness. Sometimes I am even as arrogant as to let them know that I have bills to pay too and cannot work for lower fees.
But be aware, an offer that is too low may not get you the business either. The board may reason that you are either buying the business and will come back for more or offer dramatically lower quality.
Oh, and the fees quoted earlier are private wealth management IC fees in Switzerland. My wive averages from 175 to 125bps advising real estate funds and pension funds, also in Switzerland, but their service offering is very extensive.
Good luck!
 
Well if what bipolar boston boy says is true, then 5 bps would be the average. I understand that it may come off as trying to buy the business, but honestly we can provide just as high of a quality as the BB players, who have their old boy system set of managers they put into every search. Say would it be fair to say 25 bps would be large enough that we’re not trying to buy the business egal?
This one is a key battle ground as multiple 300+ mm pension are coming up for bid this cycle, and snagging this 30 mm would be a nice sign of credibility even if we barely profit.
 
For institutional investment consulting, 5-7bps is reasonable. Our clients are usually charged a flat fee that is independent of the assets under advisement. The fees are negotiated with each individual client and some smaller clients are probably paying more than 7bps while some larger ones are probably paying less than 5bps, but on average its in the 6bps neighborhood.
 
Thanks Johnny, do you work at one of the bigger shops like Watson Wyatt, AON? I think 5 is reasonable since the only overhead really is printing out monthly flashes, and quartely reports, in addition to keeping tabs on the managers, and setting up the custodian for distributions. 5 bps sounds reasonable in this case.
 
Wait, wait, wait. What are we talking about here? Are we talking about Investment Consultant business where you actually don’t manage the asset? (WW, AON are in the investment consultant business) Or, we are talking about hiring a investment management firm to managed the asset (equity, fixed income, hedge fund)?
 
Chuck Rox DB,
ws, it would be the WW, AON type consultant gig. Not actually managing the assets, just setting up the IPS and selecting managers.
 
Some IC charge the AMs a commission instead of/ in addition to charging the sponsor. e.g. bfinance.
Usually a one-off-fee based on AUMs and what type of asset class. 10-25 bps.
 
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