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How to Justify Advice Fees to Clients

January 4, 2018

Financial advisors’ fees have seen increasing pressure from lower-cost digital advice platforms, but being transparent about fees and delivering more than money management can help advisors justify what they charge, InvestmentNews writes.

A recent Fidelity Investments report found that published asset-based fees have remained stable at about 1%, but after discounting, the actual average fee is closer to 0.64%, according to the publication. One way to stem the downward push is to be transparent about fees right away and just publish them, April Rudin, president and chief executive of marketing firm The Rudin Group, tells InvestmentNews.

Eric Roberge, founder of advisory firm Beyond Your Hammock, shows his clients the various costs of financial advice to demonstrate why he charges a monthly subscription fee, according to the publication. And Carolyn McClanahan, founder and director of financial planning at Life Planning Partners, tells InvestmentNews that an advisor’s work should speak for itself, and if clients are asking about fees, it’s time to review what the advisor delivers to merit those fees.

McClanahan’s firm, for example, worked over the holidays to assess all of their clients’ tax situations in light of the GOP tax reform, and those clients are likely to remember the “couple hundred thousand dollars” she claims the firm saved them, she tells the publication.

Advisors need to offer much more than mere money management, which is becoming increasingly commoditized, Douglas Boneparth, president of Bone Fide Wealth, tells InvestmentNews. Instead, they need to offer real financial planning, he says. And advisors who don’t go beyond “very pedestrian investment advice” shouldn’t be surprised about fee compression — they’re probably getting paid too much, Phil Shaffer, founder of Halite Partners, tells InvestmentNews.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.