'Win-Win Fee Model' Revolutionizes Financial Industry Fee Model

'Win-Win Fee Model' Revolutionizes Financial Industry Fee Model

The Win-Win Fee Model is a new intuitive fee business model for the financial industry in the new win-win market segment.

Clients will benefit if they stay invested in the bank investment recommendation for 3, 4 or 5 years and if the return of investment (ROI) is negative for the period.

If the ROI for the investment recommendation is negative for the period of 3, 4 or 5 years, then the clients will receive a defined percentage refund of the fees paid during that investment period.

Charles Schwab, the brokerage giant, introduced a new fee concept The Schwab Accountability Guarantee™ on December 10, 2013.

In the Forbes magazine article 'Schwab Offers Refunds To Unhappy Investors, Your Move Merrill Lynch' Charles Schwab, founder und chairman of the company, explained the new fee refund concept The Schwab Accountability Guarantee™. Basically what it means is that if clients of Schwab's advisory service are not happy with their service, for any reason, they can get a complete refund of their fees.

What The Schwab Accountability Guarantee™ and the Win-Win Fee Model have in common and where they differ

Charles Schwab said to Forbes, that The Schwab Accountability Guarantee™ is not a performance guarantee, it's a service and accountability guarantee.

Although The Win-Win Fee Model is in spirit and intend similar to The Schwab Accountability Guarantee™, that it also refunds fees when expectations are not met, it differs in one key aspect.

The Win-Win Fee Model guarantees a refund of fees if the performance does not meet certain predefined levels and time periods.

The Win-Win Fee Model

If clients sell the bank investment recommendation before the end of the 3rd, 4th or 5th year, they will not be eligible for a refund of the defined paid fees.

A bank can also substitute the negative ROI component in the model with a defined hurdle rate. Many variations of the model are possible, but the benefits for bank and clients stay the same.

The new innovative win-win market segment will drive the banking fee business model into a new direction to the benefit of both the bank and clients.

3 year period scenario

If clients sell the bank investment recommendation at the end of the 3th year and the return of investment (ROI) for that period is negative, then they receive a refund of 30 percent of the defined fees paid during the investment period.

4 year period scenario

5 year period scenario

Fee Refund scenario

One only has to take a look at the success story of iShares ETFs of BlackRock to sense the growth potential of the Win-Win Fee Model and its new industry "The Win-Win Market Segment".

"Price is what you pay. Value is what you get."

Warren Buffett (born on August 30, 1930) famed investor

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