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CRM2: Client concerns

Are you meeting your clients’ desire for transparency and value?

Recent research1 has found that most Canadians welcome greater transparency in fees paid to financial advisors, with 85 per cent agreeing this is a good thing for all consumers.

However, as we’ve discussed previously, they may not be prepared for the sticker shock of seeing their fees in dollar terms under CRM2.

The solution is likely a mix of explaining fees and showcasing value. And, when it comes to value, keep in mind that many survey respondents consider advice in these areas to be important:

  • Growing investments – 87 per cent
  • Investment planning – 81 per cent
  • Capital preservation and protection – 80 per cent
  • Retirement income planning – 76 per cent
  • Saving money / accumulating wealth – 76 per cent
  • Reducing investment risk – 75 per cent
  • Retirement planning – 73 per cent
  • Asset allocation – 72 per cent
  • Product review and selection – 69 per cent
  • Financial planning – 69 per cent
  • Insurance planning – 51 per cent
  • Debt reduction – 51 per cent
  • Budgeting – 49 per cent

One approach to enhance value in your clients’ eyes may be to describe each service you offer in a way that makes it very clear what your client gains. For example, “asset allocation” is an industry phrase that may not resonate for clients; why not describe the advice you offer in this area as “selecting a complementary mix of investments which are appropriate for you and which are designed to help you achieve your investment goals"? Similarly, “insurance planning” could be rephrased as “recommending insurance solutions that protect against specific life and health risks most relevant to you and your family."

Your approach to describing the value you add will, of course, depend on your professional strengths and your clients’ financial planning priorities. What’s clear is that advisors who put fees in perspective by demonstrating value in terms that are meaningful for their clients will be at a significant advantage as CRM2 completes its rollout.

Show your clients the value of advice with this brochure

 Clients appreciate your value – but at what price?

For advisors, fees are top of mind. You’re researching the requirements of CRM2. You’re initiating conversations with clients. But how are your clients responding?

Here are two of the most revealing findings from a recent study, The Value & Price of Advice1 examining Canadians’ attitudes towards the value and price of advice:

1. Canadians want and need financial planning advice, and see value in the services advisors offer.

More than half (51 per cent) of the survey respondents say they have a professional financial advisor. They’ve sought advice from a financial professional in the following areas:

  • Investing – 73 per cent
  • Planning for retirement – 53 per cent
  • Saving money – 51 per cent
  • Getting a mortgage – 46 per cent
  • Insurance (Incl. Estate Planning) – 45 per cent
  • Income in retirement – 41 per cent
  • Lowering taxes – 40 per cent
  • Budgeting – 29 per cent
  • Debt reduction – 29 per cent

Furthermore, they’re taking advantage of the guidance they get, with 85 per cent or more applying advice received in each area.

2. Canadians are confused about what they pay for advice and are reluctant to pay even modest fees.

Just one in four (25 per cent) of the study group without an advisor consider themselves informed about the fees they pay on their investments. The number increases to 54 per cent for consumers with an advisor – but that still leaves almost half in the dark.

More to the point, what do the Canadians that were surveyed think is a fair price for advice? When asked about three hypothetical - fees on a $50,000 account:

Shows the fees respondents are prepared to pay

This underscores the need for advisors to prepare their clients for the dollar amount that will appear on their statements under CRM2 to minimize sticker shock.

It also means advisors who can clearly link price paid to value delivered have a chance to set themselves apart from the competition while enhancing clients’ trust and confidence.

More on how to address client confusion over fees next month.

 How to reduce client confusion over fees

Recent research1 raises questions about whether clients are taking in the information you’re giving them about the value and price of advice. As we pointed out previously , a slim majority of consumers with a financial advisor consider themselves informed about the fees they pay on their investments, and many Canadians think even modest fees are excessive when they see them expressed in dollar terms.

The study also found widespread reluctance to accept fees in a broad range of areas. Consumers were asked, have you or would you pay for this advice? Here’s what they answered:

  • Investing – 46 per cent
  • Lowering taxes – 35 per cent
  • Planning for retirement – 34 per cent
  • Income in retirement – 33 per cent
  • Insurance (including estate planning) – 30 per cent
  • Saving money – 22 per cent
  • Getting a mortgage – 21 per cent
  • Debt reduction – 18 per cent
  • Budgeting – 14 per cent

So advisors have two key concepts to communicate to clients when it comes to the value and price of advice. First, they must ensure that clients have a better understanding of fees charged, in dollar terms as well as percentages. Second, they must educate clients about why it’s worth paying for the services they provide.

Explaining fees
Another survey1 asked advisors when the topic of fees usually comes up. While 59 per cent answered at the time of account opening, far fewer bring up fees at the time of purchase (9 per cent) or during regular reviews (10 per cent). Furthermore, 42 per cent said they don’t anticipate their explanation of fees will evolve in the future.

Advisors are understandably reluctant to overdo the fee discussion, but given clients’ confusion about what they pay, it may be a good idea to confirm that your message is getting through. Your current approach could be working well for many clients – but you may need to spend a bit more time on the subject with some.

Showcasing value
Many of the advisors surveyed for the second study expect clients will be fine with (43 per cent), will have a positive response to (13 per cent) or will have a neutral response to (16%) the CRM2 mandated annual report on charges and compensation. Just 13 per cent expect a negative response, and just 14 per cent expect clients will ask questions.

Given what consumers told researchers in the first study, however, it may not be wise to hope for the best. Instead, advisors can seize this moment to show clients exactly where they add value in terms that resonate for clients.


1Marketing Directions, 21st Avenue Partners and PMG Intelligence , The Value & Price of Advice – 2015 Edition – A study of how investor perceptions of the advice they receive and the price they pay will trend through the multi-year implementation of the CRM2 fee-transparency provisions. One thousand Canadians with $10,000 or more in investable assets participated in the research. Results are nationally representative; data has been weighted to reflect the distribution of the Canadian population. Data collection took place from February to March 2015. The entire research process was executed by PMG Intelligence, a market research and data intelligence company based in Waterloo, Ontario.

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