A question I often get asked is “why should I pay an advisor a few thousand dollars a year to look after my finances when I can do it myself?”
What I say to those people is that it’s not about the fee, it’s about the value you get from the advice.
Fees go much deeper than investment
In the past, you had to see a financial planner to invest but that’s no longer the case. Now you can jump online and find investments yourself or use a smartphone app to invest using spare change. If I was just an investment manager there would be little value to my clients. The fees we charge go much deeper than the investments we make.
I’ve talked before about how hard it is to be objective about your own money. I’ve also spoken about the advice gap and how important it is to work progressively towards your goals and aspirations while being as efficient as you can and leaving very little to chance. If you’re doing these things the fee should never be an issue. That’s because the fee becomes a small percentage of the value you get from the advice and all the actions that have been put in place to help you achieve your goals.
If you aren’t getting value then any fee is too much
If you’re paying a fee and you don’t feel like you’re making progress, then you’re probably not getting the benefit you should from that fee. To determine if you’re getting value, look at the entire period that you’ve been receiving advice. Think about where you started and where you are now. Does this trajectory align to the goals you set for the short, medium and long-term?
As advisors, we have to demonstrate to you the value you’re getting for your fee and you have to feel that value. We’ve also got to make sure we continue to deliver value, so we have to stay a step or two ahead. This means we’ve got to consider the overall economic circumstances, asset allocation and longevity risk. We’ve got to think about whether we need to do something different so you can achieve your goals.
Our fee for this service is based on the complexity of your situation and the number of investments you have. At Viridian, our fees are transparent and unbundled. Our guiding principle is the amount we charge always has to be a fraction of the benefit you receive.
Finally, it’s always worth remembering that our fees are an opt-in relationship. That means you can turn our fees off at any point if you don’t think you’re getting value from our service.
If you don’t believe that you’re getting any benefit or value ask your advisor to articulate what you’re receiving for the fees you’re paying. If they can’t articulate this or you don’t feel that you’re getting any long-term benefit then it’s probably time to reassess your advice relationship.
Todd Clifford is Executive Advisor & Head of Client Experience at Viridian Advisory