Experienced advisor also questions why money managers are demeaning value of advice by criticising cost
Advisors have to be able to answer one critical question from clients when it comes to fees – am I worth it?
Tony De Thomasis, president of De Thomas Wealth Management, has been in the industry for 30 years and agreed with the results of a recent RBC Investor and Treasury Services survey, which revealed that firms now viewed increasing client expectations as their top challenge in the year ahead.
From his practice’s experience, he told WP the main question from clients revolved around fees and how much they are paying. This chimes with the survey, which said that the most prominent expectation concerned performance-based fees, followed by a growing demand for socially responsible investments and a shifting preference for service delivery among various generations of investors.
De Thomasis said that when asking advisors about fees, the hidden question is always whether the client thinks you are worth it.
He said: “You have to be able to define that and if you can’t, the investor is going to go home and think well, gee, maybe I am paying this person too much because they really haven't given me a solid reason for sticking around.”
He added that too many of his peers were shying away from explaining the alternatives. Not being a money manager, De Thomasis said he has more flexibility and is able to compare how he earned his money, be it through various sectors or how he monitors his top five money managers and the changes in their careers.
The other issue, he said, is that being a pure money manager is simply not enough and clients must be shown the value of financial planning.
“Because of my experience, I can relate to what might happen,” De Thomasis said. “The [scenario] that is very frightful to me is my clients who are older than 60 and getting ready to start drawing on their income.
“You can't just say take a 4-5% withdrawal. Withdrawal is okay but is the money going to last? There are going to be cycles where you can’t take that much out, so do they have a cash cushion? Do you have another alternative that you can draw money from to ride out the storm? These are questions the average investor doesn't realize or face.”
The value of advice must be protected and conveyed, which means emphasizing the extra skills an advisor brings to the table above and beyond a straight robo. De Thomasis welcomes the technological advances but said clients simply can’t get advice for free.
He said: “If the client only wants a portfolio and is tech savvy, I can match the price [of a robo]. But don’t then call me for advice and expect me to match the price of a wholesaler; it doesn't work that way.”
De Thomasis is bewildered by the money managers who take aim at high fees, believing they are essentially talking themselves into becoming obsolete. In a world of index portfolios, such talk is likely to push clients towards the low-cost products and minimal, if any, advice. Picking on advisors is easy, he added, because they are on the front line.
“[Money managers] are saying fees are high but they are including the advisor fees as part of the package. You are a portfolio manager – you don’t give advice, you don't collect assets, so who do you pay to get assets for your company? Who do you pay to see that client face to face so they like that product?”
He added: “Are they saying don't buy a money manager because we're too costly? They’re not saying that, they are saying this is what’s wrong with the industry. Well, you're the industry, you’re a money manager, which means you have problems too.”