August 18, 2011

Pershing Introduces a New Pricing Tool and Guidebook to Help Investment Professionals and RIAs Drive Profitability

JERSEY CITY, N.J., August 18, 2011 — Pershing LLC, a BNY Mellon company, today announced the availability of a new guidebook, Pricing Strategies to Create Growth: An Independent Advisor's Guide. The publication examines the leading pricing strategies among firms and provides best practice guidelines to drive profitability. In addition, Pershing is launching the Pricing Your Advice tool, which enables firms to explore implementation of different models to price their services. These resources, available to both Pershing and Pershing Advisor Solutions customers, are part of Pershing's commitment to creating actionable practice management solutions to help advisors and investment professionals grow their businesses, optimize human capital, maximize operational efficiency and manage risk.

"The guidebook's pricing information and the Pricing Your Advice tool are a powerful combination that firms can use to develop a plan for enhancing firm profitability while improving the value they provide their clients," said Kim Dellarocca, head of practice management at Pershing.

The guidebook, developed with consulting and research firm FA Insight, reports that keeping firm pricing in line with the business environment is a practice that is often overlooked. Market downturns, increasing regulatory pressures and growing human capital costs are just a few of the factors that can provide a different approach to pricing. While the operating environment continues to evolve, pricing strategies have not kept pace. Only 31% of all firms surveyed by FA Insight in 2010 review their pricing structure on an annual basis to ensure that it is at suitable levels.  

"Maintaining profitability in both strong and more challenging markets requires a fresh look at pricing practices and an annual review is recommended to ensure the continued relevancy of a firm's model," said Eliza De Pardo, principal at FA Insight. "As a firm's offering to clients changes, so too must the pricing method, pricing level and potentially the collection methods deployed."

The Pricing Your Advice Tool provides a practical approach to calculating firm profitability and enables advisors to calculate hourly rates, specify client operating expenses, identify breakeven points and develop effective pricing plans to manage profitability through the changing environment.

Highlights from the guidebook include:

  • Minimum Fees Protect Profits – Many advisory firm owners have implemented a minimum dollar fee to defend against the profit variability caused by growing client service demands, diminishing portfolio values, increasing human capital costs and other operational challenges. According to survey results, 57% of all firms implement a minimum dollar fee to better maintain business profits. Of those firms that implemented a minimum dollar fee, 80% of clients are meeting or exceeding the minimum.
  • Value-Based Pricing Increases with Firm Size – In 2010, 56% of firms surveyed reported employing some form of a value-based pricing structure. Use of value-based pricing increases to 70% for the largest and most successful firms. This pricing method evolves with firm maturity and a solid belief in the value being delivered by the firm; a strategy that can bolster firm performance through more challenging times.
  • Current Operating Environment Illustrates Limitations of Asset-Based Pricing – Asset-based pricing is the dominant pricing method applied by the vast majority of advisory firms. While this method has several advantages, it also poses significant limitations for firms delivering comprehensive wealth management services.  As the breadth of a firm's service offering increases, profitability per client is challenged under a pure asset-based pricing structure. Also, firm revenue is at risk in the event of a decline in the market or investment performance.
  • Combination of Pricing Methods May Serve Best – The study provides detailed explanations of how to determine appropriate pricing for different services, such as tax planning, cash flow analysis or comprehensive financial planning and explores how to set appropriate pricing for clients with differing levels complexity and needs.
  • Communicating the Value Story – When implementing a new pricing structure, the initial discussion will be the most challenging as advisors grapple with presenting the pricing in a clear and confident manner. The value story should articulate the tangible and intangible outcomes that the firm achieves for clients, such as meeting specific retirement or savings goals or the peace of mind that all of their finances are being managed effectively.

Pershing Advisor Solutions LLC (member FINRA/SIPC) is an affiliate of Pershing LLC and a leading custodian to independent registered investment advisors and dually registered advisors working in conjunction with many of Pershing LLC's introducing broker-dealer customers. Pershing LLC (member FINRA/NYSE/SIPC), a BNY Mellon company, is committed to delivering dependable operational support, robust trading services, flexible technology, an expansive array of investment solutions, practice management support and service excellence. Through an innovative custody platform, Pershing Advisor Solutions delivers superior expertise and scalable and customizable solutions to help independent registered investment advisors manage and grow their businesses. Additional information is available at

Pershing LLC (member FINRA/NYSE/SIPC) is a leading global provider of financial business solutions to more than 1,500 institutional and retail financial organizations and independent registered investment advisors who collectively represent more than five million active investors. Located in 21 offices worldwide, Pershing and its affiliates are committed to delivering dependable operational support, robust trading services, flexible technology, an expansive array of investment solutions, practice management support and service excellence. Pershing is a member of every major U.S. securities exchange and its international affiliates are members of the Deutsche Borse, the Irish Stock Exchange and the London Stock Exchange. Pershing LLC is a BNY Mellon company. Additional information is available at

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets.  BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team.  It has $26.3 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available at and through Twitter @bnymellon.