A financial advisor I know in Arizona answered her mobile phone one late afternoon on Christmas Eve.
The call was from her client. She was at a Cadillac dealership and she needed advice.
This client was looking at a car she loved but was not sure she could afford. The salesperson was showing different options to put the car in her driveway by sunset. He showed her buying the car for cash, taking a loan, or leasing the car. It was decision time and she did not know what to do.
Taking down all of the information, all of the numbers, doing some calculations, and a quick internet search, her conclusion was to do nothing. She told her client to go home and they would speak the day after Christmas.
After Christmas, the financial advisor showed her client low mileage pre-owned cars she found on-line in the Phoenix area just like the one the client was looking at. She explained the way a new car driven off the lot depreciates and how they were going to wait until New Years Eve to buy the pre-owned car to get the best price.
Her client listened, and in the end, the result was that she drove away with a low mileage pre-owned Cadillac SRX fully loaded with options the new car she was looking at did not have. The price was cheaper than the new Toyota her brother had bought several months earlier.
When I say that investors should never pay an advisory fee for their investments, this is exactly what I mean. In fact, I maintain the advisory fee has very little to do with the investment itself.
You pay an advisory fee to have access to a financial advisor for a host of “what should I do” questions ranging from buying a car, to tax planning, estate and trust planning, charitable giving, and so on.
While other advisors like attorneys or CPAs may charge hourly fees for their services, financial advisors wrap all they provide their clients in that advisory fee.
Said differently, the advisory fee simply gives a client access to you.
It gives them access to your network, your years of study, experience, and wisdom.
When you finish reading this blog, please grab a yellow pad and jot down the various things you do for a clients from recommending plumbers, electricians, or handymen who have a stellar reputation to sophisticated family, investment, tax, and estate planning.
And everything else in between!
I maintain that when you consider all you do for your clients, the advisory fee is an efficient way of a client paying for the professional financial and life services you offer on a 24/7 basis.
The next time a prospect says that Vanguard might be able to handle the investment for x basis points cheaper than you, let them know they are not paying the advisory fee for the investment alone.
They are paying it for you and all of those items you jotted down on your yellow pad and your years of experience.
Oh, and by the way, the advisory fee also pays for the investment advice and goal progress that they originally came to you seeking!
If you would like, please download the menu of services that Dunham created that you can personalize with your logo, picture, and contact information and customize the list of services you offer.(1)
Call our desk at (858) 964 – 0500 and we can share with you how other financial advisors have used the menu of services.
Moreover, feel free to forward this blog to other financial advisors you believe can benefit from this.
(1) You need to obtain approval from your compliance department prior to use of the Service Menu.Subscribe to the Dunham Blog