Toronto-based Assante Corp. rolled out a fee-based platform at the end of August after testing it successfully with a handful of interested advisors during the summer.

“It really is there to provide full flexibility for advisors and their clients in conducting business any which way they want,” says Joe Canavan, Assante’s chairman and CEO.

Assante’s fee-based platform, which has been slotted into its regular grid structure, costs clients $1,500 a year in addition to a percentage cost based on the size of their portfolio with the firm. Canavan says the percentage is somewhat negotiable between the advisor and the client, but it ranges between 1.5% for clients with less than $250,000 and 0.5% for those with a portfolio of more than $1.5 million.

“It is a very competitive fee structure,” says Canavan. “And if at some point the client says: ‘I want to move all of my account to exchange-traded funds,” he or she can do that. And the advisors are still going to get compensated for all the work they do.”

Assante runs platforms on both the Investment Dealers Association of Canada and the Mutual Fund Dealers Association of Canada. Its fee-based model fits into an ever-larger net of fee-based business in the advisory industry, says Ian Russell, president and CEO of the Investment Industry Association of Canada, which encompasses the IDA business.

Fee-based business has doubled in the past five years, says Russell. Assets in the fee-based category reached $140 billion, or 22% of client assets, as of March 31, 2007. In 2006, revenue in the investment industry reached $5.6 billion, with 23%, or $1.3 billion coming from fee-based arrangements.

Furthermore, fee-based business now has become the biggest source of revenue for the top 20% of advisors — those who manage assets for high-net worth clients. In the 2007 Investment Executive Brokerage Report Card, top advisors reported that their fee-based sources jumped to more than 49% of revenue in 2007 from slightly less than 36% in 2006. Fee-based revenue for the other 80% of advisors increased to about 38% from less than 30% in 2006.

“Assante’s platform is a variation on this growth theme,” says Russell.

Dan Richards, president of Strategic Imperatives Ltd, a Toronto-based consulting firm for the financial services industry, says similar models probably will become more common among the traditional mutual fund dealerships as well. Successful advisors who can focus on accumulating assets of the wealthy can use it to compete against discretionary asset management.

“To secure these clients, who tend to be price-sensitive, planners will be competing against brokers or investment counsellors charging an all-in fee as low as 1%,” says Richards (see p. B3).

All F-class products as well as Assante’s United Financial offerings and wrap products that are offered at that pricing level, will be available on the platform. “Anybody who has F-class pricing on their solution will qualify,” says Canavan, adding that ETFs can be part of the mix as well.

The model is not particularly profitable, but dealerships never were, Canavan says wryly. He adds that if clients invest in United Financial’s Optima managed product over smilar products from, say, Mackenzie or Trimark then the firm stands to make some margin there.

Assante was urged to offer fee-based service by wealthier clients who want a single account, with a flat management fee to take care of their assets, taxes and financial planning. Several advisors asked for the option to offer fee-based services and when more are interested, Assante will offer some basic coaching on how to position and market the platform to interested clients.

Apart from the reporting and personal wealth management included Assante’s model, Canavan says some clients may be sold on a tax advantage of the accounts. He says the Canada Revenue Agency may consider part of the management fee on fee-based accounts tax deductible against the client’s income, although that will be for a client’s tax advisor to conclude.

“There are any number of ways you can show value added to the client,” he says.

In a marketplace that’s crowded with wealth-management solutions, Canavan believes the service will be limited to 5%-10% of advisors. “I never believed that there was going to be a huge push toward it,” he says. “Most clients and advisors are comfortable with the relationships that they have.”

@page_break@Canavan balks at the suggestion that there is conflict of interest in the traditional commission-based model, but he does say the transparency of the fee structure is important, and that’s part of the package as well.

Russell describes the transparency of the fee-based model as a “huge benefit” to clients. It is important to clients that, as markets change and as more or less trading is necessary in the client’s life cycle, he or she will know exactly how much it costs to run the account, Russell says. IE