Chasing Basis Points

In the wealth management world, basis points mean everything. Hedge funds may charge 100 to 200 basis points plus a performance fee. Fund of funds typically charge 50 to 100 basis points plus a performance fee. The model for wealth management firms could be 50 basis points for managing a $10 million portfolio.

Based on our observations, we know wealthy individuals and families pay close attention to basis points. We have all seen administrative platforms trying to find greater efficiencies for their business model so they can lower their basis point charges. It is not uncommon for an asset manager to be fired over 5 to 10 basis points – either via performance or administrative costs. The bottom line is this: basis points matter and life insurance is no exception.

This article discusses the opportunity to have meaningful basis point reductions in a life insurance policy and the impact lower basis point charges can have on this asset class and how to take advantage of the possibilities it proposes.