VP tells WP how trust and transparency can build relationships and boost your AUM
Technology is now central to how advisors strengthen and reinforce their value proposition. It’s also the perfect tool to be proactive – and to some extent preventative – when it comes to fees.
Tom Burmeister, VP of Financial Planning at Advicent, told WP that, first of all, it’s vital that advisors make sure fees are clearly understood and transparent. No one wants an investor or client poring through the fine print to try to figure out what they're paying.
Being open about fees at the beginning of a relationship or when something changes adds that level of trust, he said. “Regardless of what the fee is, you won't ever have a situation where a client reads something online about, ‘are you paying too much or do you even know how much you're paying your advisor?’ You are then immune from those type of things.”
Technology, he added, is going to be important for justifying fees in a couple of main ways, which both involve making engagement between the client and the advisor much easier.
Firstly, in terms of financial planning, data gathering and onboarding clients, technology allows the client to be more efficient and approach the onboarding process on their own terms rather than scheduling a long meeting with the advisor.
Burmeister said: “Right out the gate, technology is proving that the advisor is putting the client's time first and trying to make things as efficient as possible.”
Then, on an ongoing basis, technology can offer peace of mind that a client can log in and have access to real-time updates of their financial life, whether that’s portfolio balances, how investments are doing on a particular day or how their goals are tracking over the long term. This reinforces the value proposition of an advisor on a regular basis as opposed to a statement in the mail or even a digital statement, which doesn’t bring to the forefront the value that an advisor brings to the table.
Burmeister said: “I'm trying to be more preventative and proactive, and to really get in front of things so the client never gets to the point where they're having this sort of internal conversation with themselves and looking to Google for the answers.”
A key part is fostering a sense of collaboration with the client, which may involve providing a menu of services that includes fees. This helps match clients with the most appropriate service level and offers another opportunity for transparency, while the client will also acquire knowledge ownership and accountability over the services and, therefore, the fee structure that they're signed up for.
This is good for the short-term relationship as well as the long-term one, which can also help an advisor build their AUM and practice. A 2019 Cerulli report, US Advisor Metrics 2019, showed that “heavy” technology-using advisory firms have an average AUM of $238.9 million compared with “light” technology-using firms, which have an average AUM of $106.3 million. Further, it was found that heavy technology users spend 34 per cent less time resolving client service issues and have 24 per cent more time for practice management activities.
“Relationships are the strong foundation of trust,” Burmeister said. “Once an advisor has had some success with the client , they can start to ask whether the client wants to consolidate services they are getting elsewhere."
More selfishly for advisors, clients appreciate the ability to see all their accounts in one place, whether its managed by that advisor, institution or not - and this creates a nice trade off. While the client gets the convenience of seeing all their financial information in one place, the advisor can see if they have a TFSA or an account that is not getting much attention where they can add value.
Burmeister said: “The advisor has now created an opportunity for themselves because of their investment in technology to be able to position their value proposition for an account or service to the client.”
One trend that he is keeping a close eye on is the maturity of the subscription services model, which is not necessarily based on AUM or account size. He added that regardless of the age of the investor, a lot of us are now consuming subscription-based services, whether that be metrics on the entertainment side or apps that we're using.
He explained: “It gives the impression that the client or the prospect knows exactly what they're signing up for. They know that they're not going to get any surprises if it fluctuates over time.
“It’s very easy to explain and understand, which I think is an advantage that absolutely should not be overlooked. My main point is that it'll be interesting to see just how prevalent that model becomes when it comes to making its way on to a menu of services.
“I've seen a couple of good examples of that. It's going to be fairly slow moving on both sides of the border, but it’ll be fascinating to see kind of how that subscription service model makes its way into financial services when it permeates a lot of the rest of our lives.”
