The vast majority of our clients understand that financial services do not come for free. This is why our business exists. Not all Canadians have the time nor the inclination to manage their financial affairs. Therefore, they delegate that responsibility to financial professionals like ourselves.
The costs associated with these services should be clearly stated and understood by each and every client. Unfortunately, most investors can’t articulate how they are charged or how their financial professional is compensated. For instance, our office charges a percentage of assets managed. No commissions and no trailing fees. Regardless of the amount of activity in an account, our clients know their fee rate is static.
I think it would help if clients first understood what value they are deriving by working with their financial professional. Is it savings of their time? The promise of strong returns? The simple disinterest of doing it themselves?
Whatever the reason, there is an intrinsic value attributed to it, and that will differ for every client.
At The McClelland Financial Group, our value is in our ability to manage clients’ financial affairs in a worry-free manner. Our clients choose to work with us because they know that our objective advice will keep them on their plan for financial success. Guiding our clients from making investment timing mistakes can save percentage points of returns over the long term, thus covering our fee.
The above slide illustrates the performance of the S&P/TSX composite over the last 30 years. It also illustrates how a client’s account would have performed if they missed a number of the best performance days over the last 30 years (10,950 days). Over that length of time, I think it is safe to say that a Canadian investor could miss 25 days (0.2% of the days) if left to their own devices. This would be an opportunity loss of 3.4% versus the S&P/TSX composite. A client would limit the opportunity loss to that of their fee working with us.
Our clients attach a high value to the discipline, objectivity and relationships that we provide. For those that do not, our office will not be a good fit. However, we know that we can help any Canadian family who see value in what we do.