Value Advice for Financial Advisors

Posted by Richard Harrington on May 22, 2017 2:25:06 PM
Richard Harrington
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In an article in the Wall Street Journal last week, columnist Andrea Fuller detailed her journey through the frustrations of trying to find out the fees (read: price) she pays her financial advisor. Due to conflicts of interest, the WSJ does not allow reporters to invest in individual stocks, so she has a blend of mutual funds and Exchange Traded Funds (EFTs) managed by a leading financial advice firm (she didn’t reveal which one). During her ordeal, she was told she was paying a $125 fee by someone at a call center, then promptly told by her advisor that in fact this wasn’t the case; she paid no fee, but the advisor took 0.85% of her investments. When she delved further into the fees charged by the mutual funds themselves, they could only give her a ball park amount; she’s still waiting for the final answer.

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As the firm was floundering around this question, one crucial element was missing from the conversation – value.  Not being able to tell your customer the price they pay is bad enough, but having no follow up conversation detailing the value delivered for the price paid is downright dangerous to your business. As an Account Manager, for every customer you serve you should have information on the price paid, the volume consumed and the value delivered easily accessible. If the customer does not ask, then there is a great time to use this information – the Quarterly Business Review (QBR). Let the customer know, in dollar amounts, how much value your solution has provided to their P&L. Have this on page 1 of the presentation. Your customer should know, unambiguously, how valuable working with you is to their business.

For the financial advisory firm, the conversation could go something like this: “We charge an advisor fee of 0.85% and as we have you invested in a moderately conservative mutual funds, your average fund price is 0.55%, giving a total of 1.4%. By using our investment expertise, we are able to put you in the perfect allocation for your risk profile; consequently, your investments are on course to beat a simple S&P 500 fund by 1.9% over your specified time horizon.” See the difference? If you know the value delivered and are able to communicate it front and center, you should never be afraid of customer questions around price.