I’ve noticed that every 3 to 5 years our industry goes through a fee debate but in the end nothing changes.
This time is different.
I have been reading the feedback and closely following the comments recently posted on Advisor.ca regarding trailer fees. Investing itself has become a commodity, thanks to the rise of ETFs, discount brokerages and the abundance of research available on the Internet. Twenty years ago, online investing didn’t exist, easily accessible fund and investment research were nowhere to be found. You had to pay for research that is now available for free.
I am very surprised advisors don’t realize transparency is coming and faster than they might think. Imagine if you invest your client’s $1 million dollars in a DSC fund and they then receive a confirmation in the mail of the purchase with a breakdown of the commissions paid and trailers for the year. Can you really justify $50,000 commission plus $5,000/year in trails? I believe we stand on the brink of a colossal change to the financial services industry. With fraud, confusion, focus on fees, poor returns and just downright bad advice rampant, fee transparency is inevitable.
I believe in the concept of transparency so much that I converted to IIROC primarily to have access to a full fee-based platform. I have always disclosed my fees — be they DSC or trailer — to clients so that they understood what I was earning. However, nothing makes it clearer than seeing the fee every month.
With the premise that fee transparency is inevitable, what are you doing to provide value to your clients in order to justify your compensation (whether they be DSC, FE, or fee based)?
Here are 5 ideas you may wish to consider:
45% of clients are looking for a retirement lifestyle plan — offer it.
At our office, we charge a fee for the plans we prepare and we focus on both financial goals — such as retirement — but also on life goals — such as travel and dreams. We hold workshops to educate clients and prospects on what we do, so they see us as planners, not simply investment advisors.
67% of clients want a periodic or annual review — make the reviews count.
Turn the annual portfolio review into a comprehensive client review. We schedule semi-annual reviews for clients and go over their entire plan through the use of our Client Dashboard. This allows the client to see how they are progressing towards all of their goals and takes the focus away from simply investing. Ninety percent of the review is spent specifically on areas we have direct control over, such as cashflow, life goals planning, and insurance. The remaining 10% of the review revolves around investments and the markets, which we can’t control. This added value approach allows clients to view us as their personal finance coach who is here to help them stay on top of achieving their goals.
Start offering comprehensive planning — there is no competition in this space.
In Canada, we have over 100,000 financial advisors. That’s an advisor for every 300 Canadians. Boy, that must mean a lot of competition, but you won’t find competition in the planning space. I’ve been in the business for almost 20 years and every time I ask clients to bring in a copy of their existing financial plan, I never see one. This tells me that either no Canadians have a comprehensive financial plan or that the ones who do, aren’t looking to change advisors. If you become part of the less than 10% of advisors who offer financial planning, you will see that there is little or no competition. The plan doesn’t have to be complex. In fact our plans are very simple but still comprehensive.
33% of Canadians want cashflow planning — help them out.
For all of the plans we create, we also do comprehensive monthly cashflow planning. How else would we be able to know if they could afford to execute the recommendations we are proposing? Our typical client is 45 years-old, earns $165,000 and has assets of $350,000 when we meet them. Because we focus on cashflow planning, we are able to help many of them save approximately $3,000 more monthly than what they were currently saving before we met. This is beneficial for the client and helps you increase your monthly PAC business.