Clean Shares And Fee Compression: Regulation, Economics, And Strategy - Clean Shares Have Become The Embodiment Of An Industry Discussion Around Investor Fee Transparency And Fee Compression, Finds New Aite Group Research

An expansion of clean shares (or the elimination of shareholder services fees) would greatly affect the balance of economics between product distributors, manufacturers, clients, and advisors. This is complicated by an overall downward trajectory of investment product and advisory revenue. As a result, U.S. custodians and asset managers are looking at their economic value chains, and all areas of profitability are in question. Aite Group’s latest report, Clean Shares and Fee Compression: Regulation, Economics, and Strategy, examines how the clean share idea accelerated the conversation about investment product economics, and how U.S. financial providers view their alternatives.

“If custodians do not get reimbursed for shareholder services (e.g., in a clean shares model), they will seek to recoup those losses by pressuring other channels,” explains Greg O’Gara, senior analyst at Aite Group. “These channels include clients, advisors, and asset managers. The revenue stream from shareholder services represents hundreds of millions of dollars to the industry,” he adds.

This new Aite Group report explores how clean shares became the embodiment of an industry discussion around investor fee transparency and fee compression after it was introduced with the Department of Labor’s fiduciary rule. The analysis in this report leverages Aite Group interviews in the second and third quarters of 2018 with firm executives from U.S. custodians, asset managers, and industry groups.