Why investors need advisors

By Bryce Sanders | December 23, 2013 | Last updated on September 21, 2023
3 min read

We sell direct to you.” “Let’s cut out the middleman.” It’s a message consumers love. Travel agents, bookstores and video rentals all suffered as consumers got comfortable shopping online.

Read: Prospecting over the holidays

Financial advisors are middlemen. Investors have abundant knowledge at their fingertips, and constantly see ads for online investing.

A California-based advisor I know has an innovative way of explaining how he adds value.

“If you have the ‘Three T’s’ you don’t need me. The first ‘T’ is Time—the time to do research and anticipate tax consequences. The second ‘T’ is Technique—knowing what you’re doing, knowledge. The last ‘T’ is Temperament, or emotional control. If you’re missing one or more of the “Three T’s,” it makes sense to hire me as your advisor.”

Here are some objections you may encounter, and how to respond:

#1: “Only an idiot uses a broker. I can invest for free with no-load funds.”

Real Question: Why pay for something I can do myself?

Message: Nothing is free, only one less person is getting paid. You’re incurring hidden costs. Let’s discuss the difference between what you are paying and what I charge.

How to Say: “It’s important to understand the difference between ‘No Load’ and ‘Free.’ You’re still paying. Ongoing costs on your funds is public information. The issue isn’t between paying 1.5% or 0%, because you’re already paying 0.9%. Let’s discuss the value you receive for that additional 0.6%….”

Read: When clients complain about good news

#2: “Personal attention? I’ve seen the ads. I can get that with an online broker.”

Real Question: They’re friendly when I call. They’ll look after me, right?

Message: Advice comes from an advisor who understands your unique situation. Do you get the same person each time you call? Is someone specific responsible for your account?

How to Say: “Do they understand why you invest and what you want to accomplish with your money? Have they ever met your family? What if something happened to you? Who would they go to for advice?”

#3: “I don’t need you. I’m making money in the market. I’m happy with the results.”

Real Question: I don’t understand how you add value. Making money is easy, isn’t it?

Message: It’s important to consider results in the context of indices, risk level and tax consequences.

How to Say: “I’m glad you’re making money, but investing is more difficult than it looks. Let’s assume the market’s up about 25% YTD. Is your return, net of fees, over 25%? It’s also important to understand the level of risk you assume to achieve your return. That suddenly becomes very important if the market changes directions. Finally, making money and keeping money are two different things. Tax planning has a place in the process. This is where we advisors add value.”

#4: “I can do it myself with all those financial planning tools out there”

Real Question: Why should I pay you for something I can do online for free?

Message: Situations are different. Implementation is key.

How to Say: “There are excellent tools available. But it’s unlikely your situation is cookie cutter—there’s probably something that makes it unique. When family and children are involved many people put a value on a face-to-face relationship with a trusted advisor. Do you have one? Finally, building a plan can be the smaller part of the project. Implementing the plan is the big part, which requires time and attention. That’s where we add value.”

Read: How to discuss the market with clients

Bryce Sanders

Bryce Sanders is President of Perceptive Business Solutions Inc. in New Hope, PA. His book “Captivating the Wealthy Investor” is available on Amazon.com.