Why continuous proof of added value is a must for fee-based advisors

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After the initial financial, estate and investment planning for a client is completed, fee-only advisors must continually prove their value. Otherwise, clients may ask them after a few years, “What have you done for me recently?”

Advisors who use this compensation model say regular communication is key to ensuring clients know they are getting good service for their annual fee.

“If you only talk to your client once a year, when it’s time to collect their contribution (to the registered retirement plan), after a few years you’re going to have a pretty dissatisfied client,” says Rona Birenbaum, founder of Caring for Clients in Toronto.

Fee-based advisors now make up a significant portion of the industry. More than 60 percent of assets in the full-service brokerage channel and 40 percent of assets in the financial advisory channel are in fee-based accounts, according to Toronto-based research firm Investor Economics, an ISS Market Intelligence business.

Vince Linsley, associate director at Investor Economics, says those numbers represent a significant jump over the past decade. In 2011, only 22 percent of assets in the full-service brokerage channel were fee-based. Investor Economics didn’t start tracking the financial advisor channel until 2019, but back then, about 20 percent of assets were fee-based.

Charles Provost, wealth management advisor and portfolio manager at Vo-Dignard Provost Wealth Management at National Bank Financial Wealth Management in Montreal, points out that even after developing their initial financial plans, a client’s life, goals and risk tolerance can change, requiring ad hoc updates or major plan changes.

“The financial plan is good now, but it needs to be reviewed over the next few years. This is an ongoing process,” he says. “Over the years, the advice is the greatest added value.”

Immediate availability is the key to demonstrating value

In addition to the comprehensive annual meetings with all clients – which cover their net worth relative to their financial plan, the performance of their portfolio and whether they spent too much or too little in the past year – Ms. Birenbaum also meets with some clients more frequently, depending on their preferences and life circumstances.

She stresses to her clients that they should come to her with any news in their lives or questions – even if it’s something as small as asking whether a personal finance or economic topic covered in a newspaper article is relevant to them.

“The key to always being of value is immediate availability,” she says. “This has several effects: it will make them achieve more; and getting a very timely, tailored response from an organization is rare these days. The human touch and the Because of their rarity, custom answers are now worth more.”

Dana Hicks, a financial advisor at Edward Jones in Delhi, Ontario, says she meets with her clients four times a year and reviews their financial plans each year. She says these regular conversations have helped her build a more personal relationship with her clients and increase her trust in them.

“You have to make sure it doesn’t become a repeat. There are clients I’ve been serving for 15 years and it’s not like, ‘We have “You don’t necessarily have to get to know each other, but you have to be genuinely interested in their lives and make it clear to them that you are working with them,” says Ms. Hicks.

The Vo-Dignard Provost Wealth Management team moved to fee-only 15 years ago, and today about 95 percent of its clients manage these accounts. Mr. Provost points out that the firm also does discretionary portfolio management for the vast majority of its clients, and believes that service and fee-only are interrelated in terms of value creation.

“We are more flexible for the client. If we want to make a trade, we have the ability to grab it and we can do it within an hour for all clients at the same price,” he says, adding that clients know they will be treated equally regardless of portfolio size.

Mr. Provost says he and other advisers also highlight the sophisticated products the firm has access to because of its size as another point of value, particularly for clients who would not otherwise meet the wealth threshold for those products.

Going beyond meetings and transactions

Both Mr. Provost and Ms. Birenbaum send newsletters to their clients to provide them with relevant information outside of the regular check-in cycle.

Ms. Birenbaum’s newsletter, published six to eight times a year, provides information on new fiscal measures in the federal and provincial budgets, insights into tax season and more.

She also publishes a monthly “Good News” newsletter with funny or heartwarming stories from around the internet. She started using the newsletter to cheer up her clients during the pandemic, and she says she consistently receives positive feedback.

Mr. Provost’s firm sends out quarterly investment newsletters outlining portfolio managers’ investment outlooks and transactions within their model portfolios.

Ms. Birenbaum also offers to speak with her clients’ children about money matters. Clients most often request that she provide basic financial education to their teenagers or work with their young adult children who are facing financial challenges, such as student debt, a difficult job market, or difficulty saving for their first home.

“They often ask us if we can work as coaches and teachers, … This is often much better received than if it were done by a parent,” she says. “Parents appreciate it.”

She encourages counselors to ask their clients from the sandwich generation – those with young children and aging parents – about their parents.

“If you bring up this issue and something happens, on the one hand they have the opportunity to express themselves, and on the other hand we can help in many ways,” she says, such as with wills and powers of attorney or determining whether parents need financial support.

Ms Birenbaum says she has built a contact list of more than 100 professionals, including those outside of finance-related professions such as psychologists and gardeners, to whom she can refer clients when needed.

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