Like many financial services firms, a leading U.S. brokerage firm had a large number of investment accounts with small balances. The firm wanted to:
- Identify which of these accounts had minimal growth potential
- Prevent FAs from wasting valuable time and effort on trying to develop these accounts
- Come up with an alternative means to find value from them
The firm compared each of its low balance accounts to IXI’s WealthComplete total household assets estimate. The firm discovered that there were approximately 100,000 households with low balances and limited additional asset potential.
The firm advised FAs to limit their attention on these accounts given their low growth potential. At the same time, the firm decided to implement a $50 annual account fee for all accounts with a balance below a specified threshold, while allowing financial advisors to waive the fee for some accounts based on relationship development reasons.
A targeted marketing effort directed at the low balance accounts combined with implementing the new account fee, or acquiring new assets up to a minimum account size, resulted in:
- $2.5 million in incremental revenue from 50,000 accounts that were charged the $50 account fee
- $20 million in incremental AUM invested by approximately 2,000 customers that chose to raise their balance by an average of $10,000 to avoid the fee
- An estimated ROI of over 300% achieved within just six months
Chart: Gains in Revenue and AUM from Implementing Account Fee to Low Balance Accounts