How SPARDATA Boosts Fee Income

When a financial institution values its clients’ sundry assets at anything other than fair market value, it squanders an opportunity to boost its fee income dramatically. Fee income earned on sundry assets can equal 50% to 200% of fees earned on more traditional liquid assets.

The basis for this claim is the nearby chart showing the findings of an IRS study of everyone who filed an estate tax return in 1993. The left-hand column represents people worth from $600,000 to $1 million; the next one, people worth from $1 to $2.5 million; the right-hand column shows people worth $10 million or more. The yellow portion of each column represents the percentage of the decedent’s net worth invested in closely-held stock and other sundry assets. The IRS found that sundry assets represent 9% of the net worth of people worth between $600,000 and $1 million, and 31% of the net worth of people worth $10 million or more.

Since most financial institutions currently value their clients’ sundry assets at $1, they collect little or no fee income on these assets. What if instead institutions fair market valued their clients’ sundry assets and collected fees just as they do on publicly-traded stocks, bond and mutual funds? The results could be breathtaking because:

	for clients with a net worth between $600,000 and $1 million, the value of their sundry assets typically will be about 50% of their liquid assets;
	for clients with a net worth between $1 million and $2.5 million, the value of their sundry assets typically will be about 75% of their liquid assets;
	for clients with a net worth between $2.5 million and $5 million, the value of their sundry assets typically will be about 100% of their liquid assets;
	for clients with a net worth between $5 million and $10 million, the value of their sundry assets typically will be about 150% of their liquid assets; and
	for clients with a net worth greater than $10 million, the value of their sundry assets typically will be about 200% of their liquid assets.

As a general policy financial institutions should charge no less to hold a client’s sundry asset than it charges to hold an easily valued asset like a stock, bond or mutual fund. Indeed the argument can be made the institution should charge a premium to hold sundry assets in managed and non-managed or custody accounts because of the unique difficulties associated with them.

	1. How many sundry assets does your institution hold (approximately)? 10-99 100-999 1,000+ 2. What types of accounts are they held in? ERISA IRA Trust Other (Specify) 3. How are they being valued now (e.g cost, $1, book value)? 4. How did you hear about SPARDATA?  Contact Information First Name: Last Name: Company: Address: City: State: Zip: Company Website : Phone: Email: I have read, understand and agree to SPARDATA's privacy policy.