Proving value is becoming increasingly important for advisors – and beating the benchmark remains a top calling card.
Chris Ambridge, president and chief investment officer at Provisus Wealth Management, said that amid the swirling debate on plummeting fees and the emergence of robo advisors, having the numbers to back up your skill level is a must.
“Everyone is trying to improve,” he said. “For us it’s a matter of delivering value. I’ve always felt that if you can get the price point right and deliver value, then clients are well served.”
He added: “[Value] is to beat the benchmark, beat the target. Because in order to deliver value you have to have some sort of frame of reference and if you’re out there saying, well, we add value because we do well – that’s a nebulous term.
“Put something on the table and say, this is what I’m being measured against, judge me accordingly, and that relative performance or relative value is something that’s tangible and clients can see and judge me on it.
“Don’t judge me on the fact I charge X fees versus somebody on the street. All you’re doing as a client is chasing your tail.”
Ambridge said that beating the benchmark remains an impressive achievement and points to studies and reports that show how most managers fail to do so.
The other aspect of value is client relationships and ensuring they each get the attention they want, with some requiring more hand-holding than others.
Ultimately, though, Ambridge said that managing people’s cash comes down to risk control and value. And he added that the arguments over fees pale in comparison to the benefits of effective estate and tax planning.
He said: “Our basic strategy and philosophies we use never change. Whether you want X, Y or Z or are going into A, B or C stock or bond, it still comes down to the bottom line: did you add value?
"There are a lot of people out there touting their positions; go for it. But at the end of the day, it’s risk control and value.”
He added: “These fees in the grand scheme of things are inconsequential compared to the savings of a good tax strategy. If you can pay the government less by paying less taxes, you save so much more on fees than going from 15 basis point to 7 basis points in an MER or a trading cost.”
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