The cost of planning matters less to clients than their advisers’ willingness to discuss the touchy subject with them, according to an IMCA training session.
“Do not fear the fee, ladies and gentlemen. Talk about it, not just once, talk about it often. They expect it and they want it,” John Hancock Investments National Sales Manager Andy McFetridge said during IMCA’s annual New York conference.
Advisers can help their clients and themselves by taking a more transparent approach to explaining fees, according to organizers of the conference. McFetridge says he thinks the Department of Labor’s fiduciary rule made cost conversations fertile ground for savvy advisers.
“When I’m working with the top advisers, they’re telling me that they’re looking at this time today as the single best opportunity to prospect in their entire careers,” he told conference attendees.
Advisers should take a “full assault” on the fiduciary rule by asking potential clients questions such as whether they’ve heard about the rule or talked about it with their current advisers, McFetridge says.
Other best practices McFetridge recommends include walking prospects through the CFP Board’s list of 10 key questions when selecting an adviser. “How will I pay for your financial planning services?” “How much do you typically charge?” and “Do others stand to gain from the financial advice you give me?” are just some of the queries.
Kevin Sánchez, a CFP who serves as IMCA’s vice chairman, says he breaks down fees into five different areas: custody, commissions, the cost of an investment manager, the price of an investment adviser and taxes.
“Most clients want to know what they’re paying, but not enough clients or potential clients know what questions to ask to ensure they know everything they need to know,” Sánchez says, recalling a nonprofit fund client who saved $482,000 after he conducted a fee audit for them.
Probably 99 out of 100 clients don’t know where all their fees are going, he adds. “Nobody’s ever really lifted the hood of the car and shown you what’s there.”
McFetridge shared a worksheet with attendees used by a West Coast multibillion-dollar John Hancock team. The team assigns dollar figures to three core services adding up to 3% of assets under care, represented on the worksheet by three funnels.
“We’re talking about value today,” McFetridge says he counsels advisers to tell their clients. “My fee is X, but the value that we provide is worth at least 3%.”
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