A top investment executive warns advisors shifting to a fee-based model better justify the dough their clients are spending -- and that includes the number of GTA advisors now adopting the model.
A top investment executive says advisors shifting to a fee-based model better justify the dough their clients are spending.
In an exclusive interview, Andrew Marsh, president & chief executive officer of Richardson GMP Limited, told WP that fee-based portfolios are not always the best option for investors. He says clients need to understand what they’re paying for, be it a wealth plan, investment policy statement or risk management process.
“From a business perspective, I like fees,” said Marsh. “…But it isn’t right for everybody and it leads to an advisor who builds a nice little lifestyle based on fees, but they forget that it’s someone else’s money.”
Marsh described some fee-based advisors as lacking work ethic and dedication to clients, which lowers the standards and professionalism of the industry in some cases.
“I’ve seen a lot of advisors convert to a fee-based practice and then take summers off,” says Marsh. “I think that the work ethic that comes from being a more respectful professional means that people should serve their clients in the way that they expect.” (continued.)
Anna Knight, a fee-based advisor with International Capital Management, agrees with Marsh, noting that as the number of fee-based advisors increases, so too does the competition amongst them. Herein lies the risk that focus shifts away from meeting investors’ needs to business generation, alone.
“It allows for professionals in the industry to out-do each other. If I work for 1.5 per cent, then she will work for one per cent,” explains Knight. “It comes down to value proposition. Sometimes it’s hard to quantify what we do for our clients. Are we going to become like lawyers where we have to justify every single minute of work we do for our clients?”
On banks, Marsh resents financial institutions that simply say "we’re interested in fee-based business because it’s good for the client," just because it serves their own interests.
“The problem is, I think the banks' push toward fees is actually more self-interested,” he says. “There has to be actual value to the client, and if they can demonstrate that I’m all for it.”
He believes advisors, in general, should be committed to building their client`s wealth and offering the best service possible. “Whether you are a fee-based advisor or a transactional advisor, I believe that we should hold ourselves to higher standards and respect the fact that it’s not our money. And that we recognize what our specialities are.”