From the new mom who dumps her financial advisor because she “can’t keep paying a fortune in fees,” or the couple commenting on the “10 minutes, once a year” of expertise they feel they get from their soon-to-be former financial advisor, Questrade Inc.’s advertisements, which challenge advisors for the fees they charge and services they provide, have become all too familiar.
The commercials, some of which have been running for at least three years, are “powerful” as they play into the growing awareness investors have around the cost of financial products and services, says Norm Trainor, fouder and chief executive of the Covenant Group in Toronto, which provides coaching for advisors.
Questrade and other robo-advisors appeal to investors who want to pay lower investment fees and may not feel that having an advisor with whom they deal with face-to-face is worth the money.
“The value equation in financial services is shifting,” says Mr. Trainor. “It’s no longer about putting someone in a particular investment. It’s about the value that the client derives from the relationship with the advisor.”
Advisors’ value proposition
This shifting value equation combined with the unappealing portrayal of the profession in the Questrade ads have many advisors working harder to either showcase their worth, pull up their socks, or both. Some may also need to reflect on whether clients looking for ultra-low fees are a good fit.
“The ads are forcing advisors to look at their business models and ask, ‘Am I demonstrating value for these fees?’” says Simon Tanner, principal financial advisor with the Dynamic Planning Partners team at Investia Financial Services Inc. in Vancouver. “If you’re only showing your client that you’re spending 10 minutes a year with them, you’re probably not worth it. Or, if business-wise, it only makes sense to spend 10 minutes a year with [these clients], then they likely aren’t a fit for your practice. Advisors should be able to say that.”
The discussion about value for service should be happening from the start of the client-advisor relationship and be ongoing, says Mr. Tanner. He recommends advisors deal with the fee issue head-on by highlighting the work they believe is worth the additional cost.
For example, advisors can point to the Questrade ads as an opportunity to discuss the services they offer that a robo-advisor may not, such as tax-saving strategies and estate planning guidance. Advisors can also play a major role in preventing clients from investing with their emotions, such as selling when markets drop or purchasing speculative stocks.
“At the end of the day, the computer isn’t going to sit down and talk to you when the markets are rough … or assess your tax situation … or give you customized, individual professional advice that helps you meet your goals,” says Mr. Tanner.
Ron Fox, chairman and CEO of Glidepath Portfolio Services Inc., a Toronto-based investment counsel and portfolio management firm, “can’t help but cringe” when he sees examples of bad service or behaviour in his profession – some of which are dramatized in the ads.
“The Questrade ads have been somewhat controversial to some advisors who actually have been jolted out of complacency,” says Mr. Fox. “Advisors who display the kind of complacency and arrogant self-focused behaviour displayed in these ads do not deserve their clients. … They have simply dropped the ball on their service and have let their clients down.”
In contrast, the ads don’t threaten advisors who are doing a good job at serving their clients, Mr. Fox says. The spots, which air frequently on channels such as BNN Bloomberg, should also inspire advisors to reflect on the services they provide regularly.
“[Advisors should ask themselves] ‘Am I really doing the best work I can for my clients?’” Mr. Fox says. “ If the answer is no, then advisors have to seek out and embrace how they can do better or risk being irrelevant in their client’s minds and functionally replaced by an alternative service or advisor, which is the marketing angle that Questrade is encouraging.”
Communicating value for service
If a client questions an advisor’s value, “then you haven’t done a good job of demonstrating that value,” says Mr. Trainor.
He recommends advisors have a “statement of client care,” that is agreed upon with each client. The statement should include objectives when dealing with clients and procedures around situations such as confidentiality, handling complaints and inquiries and, of course, the policy around commissions and fee structures.
“If advisors don’t have a clear statement of client care and aren’t able to illustrate their value, then they’re at risk that the clients they have are going to leave,” Mr. Trainor says.
Lastly, advisors should never criticize the Questrade ads, or the competition in general, he adds. One reason is that the client, or his or her friend of family member, might have an account with the other firm. “You never win by criticizing the competition.”
Instead, Mr. Trainor says advisors should acknowledge a competitor’s claims and then highlight the advantages they have over those competitors.