As part of an ongoing effort by the Bureau of Labor Statistics (BLS) program to expand the Producer Price Index (PPI) coverage of the service sector of the U.S. economy, new price indexes for the Portfolio Management industry were introduced in January 2003 and new price indexes for the Investment Advice industry were introduced in January 2004 with component historical data from June 2002. These indexes, published according to North American Industry Classification System (NAICS) definitions, appear in Table 5 of the monthly PPI Detailed Report, and are available online through the BLS website.
The Portfolio management lines for which price indexes are available include:
The primary output of Mutual fund management is investment advice and investment management through diversification and risk minimization. Mutual funds are owned by shareholders that elect a board of directors to oversee operations and determine a fund's investment goals. Investment advisors are paid by mutual funds to select and manage the securities that make up a fund's portfolio, consistent with its stated investment objective. Within this stated objective, the board of directors pays the mutual fund manager to keep the funds assets maximized. Price movements for this index are based on changes in the amount of revenue a mutual fund manager receives for providing investment advice. To track price movement for the index, data on management fees are collected. The management fee is most often based on a percentage of assets under management or a certain number of basis points (FEE = BP*FV, where FEE is the management fee, BP is basis points, and FV is fund value). The basis points charged by mutual fund management firms tend to be list prices that are fully published in prospectus documents. A basis point is equal to 1/100th of a percent, or 0.0001. A mutual fund's assets are held fixed from the beginning of the reporting period, not allowing any inflows or outflows, and are updated by the rate of return on a quarterly basis.
Similar to Mutual fund management, the primary output of Private portfolio management is investment advice and investment management through diversification and risk minimization. Unlike mutual funds, portfolios are normally tailored to a specific person or an organization. Some examples of portfolios are corporate retirement funds, foundations, and trusts. The portfolio manager selects securities in order to maximize the assets in the portfolio within the agreed-upon investors' investment objectives. Outputs measured in this index include fees earned by financial advisors managing portfolios created by portfolio managers and commodity trading advisors, and fees for reports concerning securities prepared by investment researchers and portfolio analysts. Price movements for this index are based on changes in the amount of revenue a portfolio manager receives for providing investment advice. To track price movement for the index, data on management fees are collected. The management fee is calculated using the formula stated above for mutual fund management. A portfolio's assets also are held fixed from the beginning of the reporting period, not allowing any inflows or outflows, and are updated by the rate of return on a quarterly basis.
The primary output of Investment advice is the provision of financial planning and portfolio analysis services on a fee basis. A financial planner helps a client to: Clarify present situations by collecting and assessing all relevant personal and financial data; decide where the client wants to be by identifying both financial and personal goals and objectives; identify financial problems that can create barriers to the client's financial independence; and, finally, write, implement and constantly review a financial plan. Transactions that are measured in this index include fees paid to financial planners for creating financial plans, hourly fees for financial advice given by financial advisors, and fees for reports concerning securities prepared by investment researchers and portfolio analysts.
In the case of financial planning, investment research, and portfolio analysis, the unit of measure for a financial plan and a securities report is a fee that can be determined from the number of hours spent on a document, the length of a document, the complexity of a document, or a flat rate.
Last Modified Date: November 07, 2005