Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
We are receiving a number of inquiries from our clients about fees. If the market is strong, they don’t see the need to pay us, and if the market goes down or has a hiccup as it recently did, they are mad because they are paying fees and we can’t prevent the loss in the portfolio that might come along with a downturn.
I know it is the nature of our business but it always reminds me how terribly uneducated our clients are about how this works and what we do for them.
Is there something we need to do on an ongoing basis? Do you recommend when the market goes either up or down we proactively communicate? Do we just accept the fact that they aren’t going to get it and we don’t try to teach them?
It’s perplexing.
A.J.
Dear A.J.,
You are writing about the eternal price versus value conundrum. A few questions about what you’ve done so far, in response to your questions:
- What steps do you take now to talk about where your fee goes, how it is calculated and what it covers? Even though the conundrum is known and recognized, I still see many advisors simply talking about “1% fee on AUM” and not much more. Are you helping your clients understand what’s involved in portfolio management and meeting financial goals? Are you explaining who is devoted to their portfolio and the time it takes to manage it effectively? I don’t know enough about how you run your firm, or how many people you have to help you with specifics. But make sure you aren’t assuming the fee is known and understood if you shared it once and have not talked about it again.
- What are clients saying about the fee? While your inquiry is general on the topic, I’ve found people are usually asking about something in particular. The client won’t always share what they are really thinking or they might use fees as a smokescreen. How strong are your relationships and are there any issues you are not addressing that you need to be?
- Are you waiting for clients to contact you and share their concerns, or are you reaching out to them to address potential changes to their portfolios before they ask? For example, when the market is dynamic in one direction or another, are you reaching out proactively or are you waiting for them to contact you? If you are reaching out, what are you saying? It can’t just be a market update; it needs to connect to their situation and what their concerns.
Dear Bev,
I know you’ve written a few times on difficult clients, but I hope you will indulge one more inquiry. What if the difficulty stems from possible dementia?
I have a long-time client with whom we’ve worked for over 25 years. She is a sharp professional who retired about three years ago with several million in her account. I’ve always enjoyed her intelligence and her curiosity and we have had many interesting discussions over the years on a variety of topics.
Over the last six months, I’ve noticed that no matter what I say, she is combative. It isn’t just disagreements; we’ve had many of those over the years. This is outright anger bordering on hatred toward my ideas and my views.
I bring up dementia because sometimes when she is speaking to me when we are in person (I see her several times throughout the year because she is local and likes to get together for coffee and such), she takes on these contorted facial expressions and spittle starts to come out of her mouth she is speaking so fast and with such venom. It could be that she has been holding things back over the years and it is all coming out now. But, to me, this is not the client I have had all of these years. She is a single woman, never married, no kids and no family that live close by. She talks about a brother who is overseas, and she doesn’t have much to do with him.
I don’t know what to do. I can buck up, and take her treatment, but what if there is a more significant underlying issue? I believe I would be doing her a disservice to ignore this.
Y.W.
Dear Y.W.,
Just this week I was having a conference call with two experts in elder care and this topic was a primary issue. As baby boomers and their parents age, financial advisors are going to face this issue on an increasing scale. It proves a difficult question for an advisor – do you “call an audible” and run the risk of alienating a very wealthy client, or do you pretend everything is fine and hope that it really is?
Without knowing this client, your description would lead me to believe she is either under significant stress (perhaps she has recently been given a difficult diagnosis or maybe her beloved dog is terminally ill – just conjecture on my part…) or she may be showing signs of dementia as you suspect.
There are a few things you could try without a close family member to turn to.
- Have you asked her directly whether she is under any stress you should know about? You could point out – from a concerned and caring perspective – that she hasn’t seemed herself and let her know you are worried about her. Try and engage her in an open, non-defensive manner and see if she will share something you don’t know about (like the ailing dog).
- Review her overall financial plan with her and pay close attention to the legal rights you have in this relationship – be sure you, or someone she trusts, has been given power of attorney and that she has adequate plans in place if she were to become incapacitated. If she has not done this, now is the time to bring it up and talk with her about it. Don’t share your concern, but rather tell her that when you were reviewing her file you noticed these documents were not in place. You could share a story about another client who did not have the adequate legal protection and let her know you are reviewing this with everyone so she doesn’t think you are singling her out.
- Consider seeking legal counsel from someone who works with elder care issues. The colleagues I spoke to earlier this week talked about being consulted on a case where the advisor believed the client to be under stress. They found serious dementia bordering on schizophrenia, but they were only able to detect this because they are experts and know the indicative signs. They ended up admitting the client to a facility for care.
- Over the years, if she has ever spoken about close friends or co-workers, you could reach out to someone she is friendly with, and share your concerns. This step is very risky for obvious reasons – from a confidentiality perspective, her friends may not know she uses an advisor so you would be sharing a personal relationship behind her back and the friends may not be trustworthy, or even notice the signs you are seeing. It’s my least favorite option but one you could consider.
I hope some of our readers will write in with ways they have managed this difficult topic. It is a serious issue, and there are no easy answers.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. In 2008, she co-founded Advisors Trusted Advisor to offer dedicated practice management resources to advisors, planners and wealth managers. She is currently an adjunct professor at Suffolk University teaching undergraduate students Leadership & Social Responsibility. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including the Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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