Now you can accurately evaluate proposed fee schedules. You can calculate any proposed schedule's impact on both overall and individual account trust fees.

You no longer need to estimate a new fee schedule's impact on trust revenues!

Use our Q4 Wealth Management System to determine if a proposed fee schedule meets any number of detailed pricing objectives you establish.

Typical Pricing Objectives you might set:

Desired total fees

Desired total fees when the market goes up or down

Acceptable risk of account loss defined as a desired range of price increase percentages by size and type of account

Market position – your fees versus competitors

Fee schedule appearance

Fee consolidation or simplification objectives

Change the mix of explicit fees and retained fund level fees

Other specific objectives, example, “Get rid of the base fee!”

Phases of a Fee Modeling Study:

We have over 25 years experience working with many of the nation's leading banks. Based on this experience, we suggest the following steps in a fee modeling study.

1. Define the universe of accounts to be priced.

2. Create and save fee schedules (current competitors' and prospective new fees).

3. Project Total Fees Under Different Market Conditions

If values decline 10%, our fees will be down $16 million! Do we need to plan for this?

4. Analyze the Competition

Develop Competitive Positions Profile, using your competitors:
A. Run competitors' fees against your accounts
B. Compare your fees to industry benchmarks – Use the Wealth Management Fee Survey.
C. Determine when you, and your competitors, last changed fees.
D. Set final competitive price guidelines

Show current revenue versus fees projected with the competitors’ fee schedules

 

Determine final schedules and projected new revenue:

5. Manage the risk of account loss:

A. Measure the range of price change and account loss which occurred for prior fee changes.
B. Project the range of price changes which will occur among your accounts for this fee change
C. Set guidelines for acceptable range of increase by specific size groups, example, if our guideline is to increase fees 20-25%, Fee Schedule NEW5, puts the most accounts in this target:

D. Run trial account lists showing old and new fee and the percent fee change.

Benefits:

Fee schedules optimized to meet your objectives

Fees may be $ millions more than from poorly designed schedules

Avoid pricing errors – fee decreases to some accounts, or, for other accounts, excessive increases resulting in account loss, discounting, or fee reversals

Peace of mind! You really know what is going to happen in advance.

Implementing New Fees:

Regardless of how well you designed your new fee schedules, you must pay special attention to how you will implement new fees. Suppose you raise your minimum fee to $5,000. You still have accounts which pay a $1,000 minimum. Will you increase their fee 5 times? Will they be phased up over time? Or maybe you acquired a bank last year whose trust fees are 40% lower. Are those accounts moving directly onto the new fee schedules?

So you will need rules as to how to apply new fees. And you would like to try out those rules and see how your bottom line will change and how specific accounts will be affected.

Editorial note: to the extent that you did a good job modeling your new fees, you will need fewer rules for applying new fees to real accounts. These rules create discounting and a greater substandard fee problem. For example, if all accounts over $5 million will have excessive increases, say over 25%, you should correct this in the fee schedule design and not with rules for applying new fees.

In the fee implementation phase, you need to create rules for implementing new fees. These can include the following:

• Modify minimum fee based on prior minimums
• Set discount to implement maximum fee increases
• Set rules for specific account groups – acquired banks, related accounts, etc.