How advisors can fight back against low fees

people-office-group-team

Here’s a great article by James Burton of Wealth Professional magazine I’d like to share with you today:

Fees have hit rock bottom thanks to Fidelity but good advisors will always have the ammunition to prove their value, according to an industry veteran.

The US division of the investment giants this month launched two index-tracking mutual funds at 0% expense ratio, winning the race to the bottom and sending shockwaves through the profession.

Rob McClelland, founder and president of The McClelland Financial Group of Assante Capital Management Ltd, believes a segment of the investor market will be enticed by low fees and the mistaken belief they can do it solo.

“But they are the very person that needs me the most because they are the very person that wants to deviate from the plan,” he said. “It’s like Noah’s Ark, you can’t save everyone.”

Fidelity’s aggressive strategy, said McClelland, is not so much about investors getting something for free but more the firm asset gathering, increasing its ability to attract investors to its whole fund line-up.

No one does anything for free, he said, adding that there are other ways for Fidelity to make money on those funds through cash balances, security lending and trading costs.

Plummeting fees also have a knock-on effect on the industry, with clients now increasingly inclined to question the value of an advisor. McClelland said he is asked more regularly whether he will lower his charges given the extra competition.

He said: “My response is no, we’re increasing our value. We’re making sure we use those funds that we know provide great value for the price they charge and you’ll pay that price. And in terms of what we’re doing, because we’re fee based, we’ll charge what we believe we provide in terms of value.

“It’s always a tough one because the real value that a financial advisor provides you is lumpy. It never happens year by year even though you pay the fee year by year. It happens when you prevent a client from making a 10% or 12% or 20% mistake. That’s where you earn your keep.”

He said: “We go back and say, remember a year and half ago, you were worried about the US, or you wanted to get out of all US equities and we talked you out of it, well here’s why. There is always ammunition you can use to defend your position to why you create the fees you do.

“Everyone thinks that the US and Trump market is going to be poor but that hasn’t worked out, or that bonds are guaranteed to lose money because interest rates are moving up. They haven’t been great but they haven’t lost money.

“So there are always opportunities to explain the value you provide as an advisor, and a big part of what we do is behaviour management.”

View Original Article

Related articles

Newsletter Images Articles

How Lower Interest Rates Affect Canadians

Canadians have been anticipating an interest rate decrease for the past six months. Why is the market so excited about an interest rate decrease? An ...
Read More →
Podcast Cover Podcasts

Episode 264: Top 10 Investment Mistakes

Welcome to another episode of Think Smart with TMFG, your go-to podcast for what’s newsworthy and relevant to everyday Canadians. Join Senior Financial Advisor Rob ...
Read More →
Newsletter Images Articles

Top 5 Tax-saving Tactics Every Gen-Xer Should Know

In this week’s article, we’re exploring five essential tax-saving strategies explicitly tailored for Gen Xers. Born between 1965 and 1980, Gen Xers are in their ...
Read More →

Financial Planning Advice from Canada's Top Financial Advisors

Sign Up To Receive Email Updates On The Financial Industry And Complimentary Workshops.

By providing your e-mail address you provide The McClelland Financial Group of Assante Capital Management Ltd. with your express consent to send you electronic communications. If you choose to discontinue receiving e-mails, you may withdraw consent by contacting tmfg@assante.com.

FREE RESOURCE

Get actionable financial insights from the Top financial planners in Toronto.

Toronto's Top Financial Advisors
Copyright Assante Wealth Management. © 2024

Disclaimer | Assante advisory services are offered through Assante Capital Management Ltd. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. The services described may not be applicable or available with respect to all clients. Services and products may be provided by an Assante advisor or through affiliated or non-affiliated third parties. Some services and products may not be available through all Assante advisors. Services may change without notice. Insurance products and services are provided through Assante Estate and Insurance Services Inc.

We have a team of advisors each specializing in varying portfolio sizes. Please let us know the approx. amount of your investable assets to help us to direct you to the advisor that is best suited to you.