It’s not an overstatement to say that Client Relationship Model – Phase 2 (CRM2) is changing the way clients view the services their advisors provide.
Advisors who understand the changes and are able to articulate their value are the ones who will turn the evolving regulatory landscape into a business opportunity.
Get ready to talk fees
For many years, the fees your clients pay for mutual funds and other types of investments were shown in terms of percentages.
With clients seeing figures like 2.0% or 2.5%, it’s unlikely that fees have been a concern for many advisors.
This may change as a result of CRM2, which will require all management fees and sales charges to be listed on statements in both percentage and dollar terms.
Where a 2.5% charge hasn’t historically been very hard for individuals to swallow, $1,250 (2.5% of $50,000, for example) may prompt a different reaction. But the amount is exactly the same – it’s just reported in a different way now.
Initiate the conversation
It’s important you articulate that fact to your clients. You should also plan to be the one who initiates the fees discussion … as opposed to waiting for your clients to receive their statements and ask you about their fees. By that time, they may already have spent some time being concerned about the dollar amount showing on their statement.
Get your message clear
Start preparing some documents/speaking points about what these changes mean (few clients understand MERs), and have a value statement prepared that tells your clients everything you do for them to merit the fees they pay.
Think it through
Your value statement needs to be well thought out and you need to be able to clearly and concisely articulate what you bring to the table, including your education, process, continuous monitoring, annual reviews and network of professionals.
Investors who receive advice often do better than those who don’t, and expressing this is not a challenge but rather an opportunity.
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