Sophie Gilbert likes to tell the story of a young advisor, one of the hundreds of wealth professionals she works with across North America. This advisor was the son in a father-son advising team, who had suddenly lost his dad. Devastated in the wake of that loss, he had clients coming to him saying “we’ve always known you as junior, but do you have the chops to do what your dad did for us?”
The young advisor called Gilbert, head of business solutions at Russell Investments. She spends her days coaching advisors, showing them how to stay relevant in a fast-changing industry. The young advisor had gone through a shock, and now had to maintain relationships his father had forged. Gilbert knew what to do.
“We worked a lot with him,” Gilbert told WP. “We asked him: ‘Okay, so how do you carry yourself? How do you need to message your clients? What do you need to be doing with your clients? Have you rediscovered these clients? How do you position yourself as the leader of the firm and as the leader for the clients’ future?”
Of the clients who raised issues, the young advisor retained more than 90%. Gilbert saw that turnaround from loss and uncertainty to steady success as a triumph, both for the young advisor, and for the strategy that she and Russell Investments say all advisors should pursue: “show your value”.
In 2019, Russell Investments published its 5th annual “Value of an Advisor” study. In it, Russell tackles a question so many advisors are being asked by their clients: “are you worth your 1% fee in an age when a robo-advisor will only charge me 35 basis points?”
“Yes” is Gilbert’s firm answer. She’s backed up by Russell’s study, which demonstrates how a combination of annual rebalancing, behavioural control, tax-savvy investing, and holistic planning, add up to a value well above an advisor’s 1% fee. Gilbert makes a case beyond the numbers, showing how a human advisor can ride the waves of robo-advice and the biggest wealth transfer in history. Gilbert believes an advisor shows their value when they lean into a client’s discomfort.
“In a meeting with a client, if there's discomfort, that’s fantastic,” Gilbert explained, “Other advisors might run away from it. The best won’t. If there's an argument between a husband and a wife, if there's a disagreement about priorities, ‘how much are we going to spend?’ ‘When are we going to tell Johnny about the inheritance?’ ‘How are we going to tell Sally that she’s not inheriting?’ All of these complexities that relate to money, but don't necessarily have a dollar figure attached to them, that's where advisors should lean in … Alexa and her peers have a long way to go before they can handle those things.”
There’s a lot of discomfort going around right now, as Canadian families prepare for the single largest wealth transfer in history. To Gilbert, that’s a huge opportunity to demonstrate value. Baby boomers are going through transitions as they retire. Their kids are starting to inherit and are looking for what to do with their windfall. Every situation is unique, uncomfortable, and complicated. Gilbert thinks that every situation presents a huge opportunity for advisors.
“Advisors who are willing to do the work, who are willing to reposition themselves, who are willing to go into these complex, uncomfortable, emotional conversations, they have a ton of potential investors,” Gilbert said. “Those investors are looking for somebody that they can trust, that can help simplify their life for them.”
Russell’s Value of an Advisor study functions as the concrete backup to Gilbert’s human approach. It emerged out of that fees question advisors get almost every day. The study functions as a toolkit, full of data to back up every facet of an argument for a 1% fee. Gilbert says, though, that even using the word fee is wrong. Instead, she told WP that they stress the term “value”, shifting the client’s mind away from a cost they pay for advice, towards the extra benefit they gain from it.
As for robo-advisors, Gilbert says their threat to a holistic human manager is overblown. She cites Amazon’s annual competition to hold a 20-minute unique conversation with Alexa. So far, the longest anyone’s gone is nine minutes 59 seconds.
“When's the last time that you had a meaningful conversation with a client in nine minutes 59 seconds?” Gilbert said, “When's the last time you were able to accomplish your fiduciary duty to your clients in nine minutes and 59 seconds? When’s the last time you were able to help a client who came to you because, they've just lost a spouse, a parent, or maybe both parents? All these things have financial implications and trigger emotions. Emotions are always a bad mix with the markets. I think that's where advisors add a tremendous amount of value is on that behavioural coaching side. In that, robo-advisors still have nothing on humans.”