Advice firms that make a huge fuss about being “fee only” are wasting precious marketing resources, say industry experts. Prospects who understand how fee-only advisors differ from their commission-based counterparts don’t need to be pitched. Those who don’t know the difference may not be particularly impressed when you explain it to them.
A fee-only firm is better off pinpointing how it differs from its fee-only competitors than worrying about commission-based rivals — especially when it comes to attracting Generation X and Y clients, says marketing consultant Mike Byrnes. Consumers who “have grown up in a world where the Internet makes it easy to do research” are likelier to look for subtle differences between advisors than their elders are.
Aite Group supports this view in a new study of the financial-advice clients’ “experience” in today’s marketplace. Next-generation customers “are less satisfied with their financial advisors relative to baby boomer clients,” the research firm writes. These discerning consumers care more about service offerings and relative cost than about distribution channels.
That’s why Hingham, Mass.-based Advocacy Investments’ strategy is to focus exclusively on clients whom most advisors turn away, rather than emphasizing its status as a fee-only RIA. The firm, still in launch phase, targets “ignored, uninformed, and overcharged investors,” according to its LinkedIn page. Founder Dave Malone, an accountant by training with experience building funds and counseling investors, says his down-market business model — predicated on keeping total costs to clients “well under 1%” of assets — reflects his determination to reach investors most in need of advice and “to do something completely different” from other financial-advice firms.
“I’m coming across as an advocate who is out to help the 99%,” he says. If his no-minimum-investment policy means taking on some clients whom other advisors might consider unprofitable, he’s counting on their referrals to make up for it in the long run. And instead of budgeting for a big marketing push, Malone favors low-cost social-media campaigns based on consumer-education concepts, which he feels are better suited to his target clients than splashy lifestyle pitches.
Other fee-only firms differentiate themselves with compensation structures that can be tailored to individual clients. For example, Fenway Financial Advisors, a seven-year-old firm in Boston with $30 million under management, charges only flat fees: retainers for investment work and hourly rates for special projects.
Besides playing up an unusual fee structure, Wintermeier markets his firm by announcing what kinds of clients he wants. That’s definitely not something every other fee-only outfit does. Fenway Financial Advisors’ landing page asks visitors if they fall into one of three categories — retirees worried about outliving their money, do-it-yourselfers looking for “unbiased advice,” or pre-retirees who want to know when they can stop working — likely to make them “a match for FFA.”
Like Malone, Wintermeier got his start in another business — in his case, the golf-gear industry. Also like Malone, he thinks his experience outside the financial-advice arena fuels his determination “not to do things the same way” as others, and to make the difference apparent to prospects and clients alike.