The only constant in the financial industry is change.
Adapting to change is the second constant. With the regulatory changes and #CRM2 in Canada, investors in the future, will see the cost of advice and fees in dollar terms on their statements. You may not be there to take all of the calls, questions and emails regarding fees and cost. You will need to have a well scripted process to explain fees, and the value people receive. But what if the client asks one of your team members, or staff? How will they answer the question “What are these fees and how does it work?” More importantly, what can your staff say, under your regulatory and compliance guidelines? I would encourage you to check with your branch manager and firm on what your staff and team members can say and have a process to handle this issue, as it will come up in the next few years. What you do not want to happen, is years of work resulting in a surprise transfer out of clients because of your staff answering the question in an incomplete manner and not understanding fees, total transparency or your value promise process. Your client knows that your staff may not be able to answer if you are away from your office, but they want a complete answer.
Total trust is total transparency
In the new #CRM2 statement format, is this everything I pay as a client? Depending on how you operate as a firm and advisor, this may not be the total cost, as money management (or fund facts ) may not be included on the statement. Even fee based accounts may not show the total cost of planning, advice and money management. Ask your firm if the total cost is being displayed on the new reports they will be sending to your clients. If it does not include everything, how will you discuss your fees when the statements may only show half of the fees? Confusing for advisors is confusing for consumers. Will segregated funds be included on the statements? How about GIC’s in the accounts? Be prepared now and build a FAQ sheet for you and your staff to understand and answer these questions clearly. It is human nature to ask these questions, once you show me the cost, I will naturally want to understand it.
Is it in dollar terms or percentages?
Financial advisors have had fee and cost disclosure discussions with their clients. Have these discussions been in dollar terms or percentage terms or both? If it is in percentage terms, you may want to consider implementing a new discussion in relative dollar terms. The new statements are in dollar terms and people might have questions when it is a new kind of statement and report that they will be receiving. Have your process down to discussing in dollar terms and go through the list of people you have had the discussion with so that your staff know they have had the discussion. Make sure you have also had the discussion with your staff so they understand what clients will be seeing and help them understand the issues, questions and new statements will be critical to your processes in the future. We know from practice management research that firms with a regular staff training program do better than advisors who do not train staff. The typical advisor spends less than 10 hours per year training staff. How many hours this year have you invested in staff training?
Train your staff
Over the past several months, there has been a tremendous focus for firms to prepare advisors for the changes coming to the Canadian financial services industry and CRM2. Firms have put on workshops, including several I have run for financial firms on preparing for the future. Have you brought your staff to those workshops to give them a better understanding of the changes and how to help prepare them? Do you have a script or process to discuss the changes with your clients, and do the staff understand the scripts? For example, when a client asks “How do the fees work?” do you wing the conversation, or do you have a scripted process to discuss fees and your clear value proposition in what the client will receive? What can or do your staff say? Do they have a script, cleared by your branch manager and compliance?
It is about the value I receive
Remember to train your staff on the process of delivering your value for the fees and cost of advice. Do your staff know your value promise clearly and can articulate it well? Can they discuss it clearly? Do you have it in writing? Do you follow a process? If the answer is no, how will they answer the question, “how do these fees work?” when you are not there? It is the advisors task to answer these questions, and train your staff to refer the answers to your advisor. Create a script for your staff to refer this to you, and let them know, if and when the client has gone through the value promise process. I am one of hundreds of people telling advisors to get a written value promise. Isn’t it about time you had one?
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