Asset management vs. advisory/consulting

This flash compares the service variants asset management/delegation with advisory: While asset management delegates the stock selection and thus also the responsibility for performance to the bank, with advice the bank only makes recommendations, but you as the client make the decision. The comparison is made based on the comparison criteria identified in the chart of the week:

• Recurring costs: At 1% to 1.5%, the industry standard (not to be confused with “competitive”) asset management fee for volumes up to CHF 500,000 is around 0.2% to 0.3% higher than the advisory fee. In the case of transaction-based advisory mandates, the client pays between 0.25% and 1% of the transaction volume depending on the transactions commissioned. This does not include the TER costs incurred within the investment products. If transparency and competition are taken into account via the Economico marketplace, this results in asset management fees of 0.48% including TER product costs for mandate assets of CHF 300,000. The asset management fees negotiated under competitive conditions are therefore far below the industry-standard total costs for asset management and advice.
• Statutory clarification obligations: Before concluding an advisory or asset management contract, the provider must carry out a suitability and appropriateness test. The exception to this is transaction-based advice, for which only an appropriateness test is required.
• Conflicts of interest: When selecting products, your provider is generally subject to a conflict of interest in both asset management and advisory services. If the bank uses its own products or third-party products with reimbursement agreements, it increases its own margin. In the case of asset management, the use of expensive products at least puts pressure on the bank's own performance, which somewhat reduces the conflict of interest. This is not the case with advisory services: as the client, you have opted for the product recommended by the provider, meaning you bear responsibility for its performance. With transaction-based advice, the provider also faces the additional incentive to initiate as many transactions as possible, which is not in your interest.

In advisory mandates, the fundamental question arises whether responsibility for decisions and outcomes is consistently aligned in practice. With its recommendations, the provider anticipates the investment decision or at least restricts it significantly, while the responsibility for the outcome lies with the client. Governance sends its regards.