Partners in Prospecting

Leader of the Pack

June 28, 2022

Leader of the Pack: What is the Value of an Investment Advisor?

Investors may not like the fees that they are charged by professionals such as lawyers and accountants, but they do understand the value they receive in return. So why is it so difficult for investors to accept and understand that Investment Advisors also need to make a living? Perhaps investors have been influenced by watching too many Discount Brokerage commercials, which make it sound as if Investment Advisor fees are not only exorbitant, but also are not worth it.

Our Chairman, Thomas S. Caldwell, C.M., recently spoke about this very issue which he calls The Big Con.

It is very important to keep your unique selling proposition top of mind with your clients and prospects.

Here are three reasons why you, as an Advisor, are exceptionally positioned to add value to any investor looking for financial, investment and life advice.

1) You’re The Expert

As an Advisor, a large part of your role is to optimize your clients’ portfolios. Unless the Do-It-Yourselfer is a day trader, then they are probably dabbling with investments by taking stock tips from friends, relatives, blogs or Googling stocks currently in the news. Most prospective clients wouldn’t attempt to “take the law” in their own hands when dealing with a legal issue, because they look for trained lawyers with experience. Your expertise is your advantage and the more you can share your credentials the better you will position yourself as a Professional. Everyone accepts that Professionals require a fee for service, and the majority of the public does not work for free.

In a recent Investment Executive article, full-service advisors add more than enough value to client accounts to surpass the typical advisory fee of 1%, according to Russell Investments Canada’s 2022 Value of an Advisor study highlighted in The Investment Executive.

2) You Can Quell the Emotions During Volatile Times

One Advisor who was talking to some soccer dads at his son’s game, was bluntly asked: “You’re an Investment Advisor, why don’t you recommend a good stock for us to buy.” His answer “Well, I could do that. But the issue is, will you know when to trim or sell the entire position? Creating optimized portfolios is a big part of my role as an Advisor.” I don’t think most of the dads would have liked that answer, but others gave him an opportunity to review their own portfolios. In these volatile times, Advisors tell me they proactively spend time quelling their clients’ emotions while working with them to ensure that the clients’ financial plans remain focused on their goals.

3). You have a track record

Over the past year, Advisors have added value of 3.85%, the seventh annual Russell Investments study found, with behavioural coaching efforts contributing the most, at 1.93%, as Advisors help their clients stay focused on saving money for long term goals, according to the same Russell Investments study published in The Investment Executive.

Educating clients and prospects will set you apart as an Advisor and your knowledge equips you with a competitive advantage. You should be direct and upfront when explaining how you are compensated. This may seem like a relatively straightforward statement, however, in an environment where fees are increasingly scrutinized, and clients are trained to be suspicious, it is prudent to be transparent. As we’ve been discussing in this blog, it is important to be as transparent and forthcoming as possible. Highlight what is included in your fees, what is extra and if there are any referral or commission agreements in place. In the current environment, clients need the expertise and experience that you bring to the table. At the same time, you earn your fees while you help to keep your client focused on their financial plan.

As usual, there is a song title in this Blog Post. Do you recognize it?

About Jennifer Kuta

For more than 25 years, I have worked with Advisors helping them build their businesses. My commitment to you is to partner with you in your practice and offer solutions to help build your business.

Investment involves risk, uncertainty and assumptions. The value of investments rise and fall and there is a risk you may not recoup the amount originally invested. Past performance is not a reliable indicator of future performance.
The contents of this blog are the personal views of the author and not necessarily the views of Caldwell Investment Management Ltd. The views expressed, while based on current market conditions and information, they are subject to change without notice and as such, there can be no assurance that actual results will not differ materially from such expectations. The comments are an illustration of broader themes and intended to be for general information purposes only.
Forward-looking statements are not guarantees of future results as they involve uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.
The contents are provided as general in nature and should not be relied upon nor construed to be the rendering of specific tax, legal, accounting or professional investment advice. Readers should consult with their own accountants, lawyers and/or financial advisors for advice on their specific circumstances before taking any action.
The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed. No representations or warranty, expressed or implied is made by Caldwell Investment Management Ltd. or its affiliates.

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