A large global bank had well over 1000+ separate
fee schedules for their wealth management business as a
result of multiple mergers, and less than tight controls
in effect when new fee schedules were set up for new clients.
The bank wished to engage Quantifacts to use its Fee Manager
software plus its consulting and problem-solving skills
to reduce the total number of fee schedules without having
any appreciable effect on clients' fees. In other words,
the goal was to reduce the total number of fee schedules
to 100 and have it be “revenue neutral”.
Quantifacts assigned
a team of consultants and analysts and began by loading
all current fee schedules into Fee Manager
as well as loading and balancing all the other client value
and fee information.
We then devised a methodology
whereby we forecast the fees for a proxy client account
at 15 separate asset levels ranging from $200K up to $30
million. We forecast the fees for all 15 asset levels for
EACH fee schedule in the system taking into account variables
such as blocked assets, discounts, overrides and minimum
exclusions. We then grouped all fee schedules that calculated
the same proxy total fee amount into segments. We then compared
the slope of the curve of the calculated fees for all 15
positions and if the slopes were similar we grouped the
fee schedules into parent and children relationships. In
this case the parent became the fee schedule into which
we collapsed all the others that met the criteria for acceptance.
Given this quantitative
methodology and using the fee calculating engine of Fee
Manager were we able to successfully reduce
the total number of fee schedules to less than 100 with
no appreciable impact to customer accounts or fee revenues.
As a second assignment,
we were asked to further reduce the number of fee schedules
given that we could have a slight increase in revenues not
to exceed 5% as a tolerance “band” around the
parent fee schedule. With this constraint loosened up, we
were able to reduce the total number of fee schedules from
more than 1,000 down to 12 in total.
Benefits the client
would realize were tremendous efficiencies in fee processing
and simplicity in operational processing each month. In
addition, future pricing and new fee schedule set up was
greatly simplified, as there was no longer an infinite palette
of fee schedule choices from which to choose.
We were able to accomplish this engagement
in less than 2 months.
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