Research and consulting firm PriceMetrix is out with a new report that finds a direct correlation betweenoffering fee-based accounts and services and increased revenuegrowth.

The results, released in the Canada-based company's Augustnewsletter finds that advisers who increased their assets infee-based accounts by 25 percentage points or more have seenrevenue growth of 47% over three years, more than double theaverage growth rate of 21%.

This compared to a revenue growth of 19% for advisers whoincreased their assets in fee-based accounts by less than fivepercentage points in the same period

The company also found:

• In the past three years alone, the percentage of industryassets in fee-based accounts has grown from 21% to 28%.
• There are few “purely fee” or “purely transactional” advisers –almost all books contain both;
• Increasingly, individual clients are choosing to hold bothkinds of accounts;
• An increase in fee asset concentration of an adviser's bookleads to an increase in the overall return on assets;
• The pace at which advisers choose to transition their books tofee varies widely;
• The pace at which advisers choose to transition has ameaningful impact on results, not only in terms of asset andrevenue growth, but also in terms of the quality of the overallbook.

The results appear to track with numbers reported by independentbroker-dealers who participated in Investment Advisor's2012 Broker-Dealer Presidents' Poll in June. Total fee-basedrevenue of the 70 broker-dealers included in the survey rose by 36%over the past three years, from $3.9 billion in 2009, to $6.1billion at the end of 2011.

PriceMetrix notes that 91% of advisers in the North Americanretail wealth management industry have at least one fee account intheir book of business. Yet it goes on to note that while fee-basedaccounts are increasingly a part of everyday life, few advisershave completely abandoned the transactional model; only 1% ofadvisors have 90% or more of their assets in fee accounts.

“Although advisers often think of themselves as having a'fee-based' or 'transactional' book, the truth is, most have (atleast a little of) both,” according to the report's authors. “Thatsaid, the trend towards higher concentrations of fee-based assetsshows little sign of abating, and as the market for fee-basedproducts matures, both clients and firms are demanding thatadvisors offer a breadth of products and services to satisfy a widevariety of client objectives.”

Investors, for their part, are catching on to the model as well,and appear to be willing to pay a premium for fee programs.PriceMetrix argues fee-based models tend to command higher revenueon assets because it forces the adviser to define and clarify thevalue proposition that will be delivered.

“The average fee-based account is 46% larger than the averagetransactional account and generates revenue that is more than threetimes higher. Households that have one or more fee accountsgenerate an RoA that is 40 to 70 basis points higher, regardless ofhousehold size, than households that are purely transactional,across all household sizes examined.”

This article was originally posted at AdvisorOne.com, a sister siteof Credit Union Times.