InvestmentNews reports that an annual survey of retail investors by State Street found that only 15% (down from about 33% last year) of respondents trust financial advisers as a group. The key issues are: performance, unbiased and high-quality advice, and transparency. Apparently, investors…

…don’t believe the fees they’re paying are commensurate with the return on their investments.

Granted, the lack of trust is evidently coupled with a lack of understanding of the finance industry or a sufficient interest in investments. However, the chief issue of performance remains.

So, how to fix this problem? By increasing fees, of course. That is what Bank of America just did by planning to raise fees on its managed-account (flat-fee) platforms at Merrill Lynch.

The current minimum fee schedule for equities on the most popular Merrill Lynch Personal Advisor (MLPA) platform with $152B under management is:

Assets Under Annual Fee
$1M 1.00%
$2M 0.65%

The new rate schedule will be:

Assets Under Annual Fee
$250k 1.6%
$500k 1.4%
$1M 1.3%
$2M 1.0%

Therefore, MLPA clients will face fee increases of 54-60%. Over 14,000 ML advisers have to implement that change by the end of 2015; the only way to reduce the fee hike for clients will be to cut their own compensation. Naturally, ML advisers are worried. So should be the clients. Luckily, Alpholio™ can easily show these investors whether advisers earn their fees by generating a sufficient RealAlpha™ on the managed accounts.

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