Proactively discuss fees and your value proposition with clients

Name:

Peter Guidote

Occupation:

Director of wealth management and portfolio manager, Richardson GMP

Location:

Montreal

In the business:

23 years

AUM:

$150 million to $200 million

Typical clients:

Retired or nearly retired professionals and business owners

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This article is part of the Advisor Edge 20 Ways to Be a Better Advisor feature package, published in the June 2018 edition of AE. Click here for more tips and to learn about our 20th anniversary.

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More volatile markets are expected going forward, potentially impacting the fee conversation with clients—maybe more so than CRM2 when it landed.

With increased volatility, “advisors will have to have conversations with clients regarding the value they’re bringing to the table for the fees being charged,” says Peter Guidote. Advisors should be proactive and have the conversation before clients ask, he adds. “Be above board from day one.”

Discussing fees in the context of performance is only part of the conversation. Advisors must also explain what real-life problems they’re helping clients solve, says Guidote. He gives clients a detailed explanation of his and the firm’s services, because clients “are looking for answers to other questions in life.”

Talking and walking value

Guidote’s value proposition focuses on ensuring clients’ retirement sustainability. After a detailed analysis of clients’ situations and goals, he models scenarios to show clients the probability of their retirement plans succeeding through different eras—and often to age 95.

“We stress-test their retirement plan through the Great Depression, World World I, World World II and so on—the booms and busts of our markets over the past century,” he says. If clients aren’t comfortable with their odds, they discuss changes such as retiring later or delaying pension payments.

He also explains that a portfolio is only one piece of the larger retirement puzzle, which includes legacy and tax planning, for example. When clients understand his integrated approach, they understand costs better, he says.

The behavioural finance aspect of keeping clients on track is also a key advisory service. That means regular client communication, especially during market upheavals, he says. At such times, he reminds clients that their portfolios have been stress-tested. (As someone who started out as a chartered accountant auditing pension funds, Guidote is acutely aware that staying steadfast with a plan based on well-defined goals—as institutions do—is key to reaching those goals.)

Another reason that discussing services is important is because investors tend to think all advisors are the same, says Guidote.

It would help, he adds, if there were a more collaborative regulatory environment that recognized advisors’ focus on client service. “The idea is to create a framework and to provide tools, perhaps, for advisors to have the fee and service discussion with clients,” he says.

“Clients don’t mind paying a fee as long as they understand what they’re getting for it.”

Guidote sees his compliance department as “an ally” and team member, especially as regulation becomes increasingly complex. “If we take a view that compliance is there to help us and not hinder us, that changes the dynamic,” he says, adding that an effective compliance department interprets regulation with both regulators and advisors in mind.