The Five Points that Belong on Every Advisor’s Website

Shouldn’t clients be able to look on a financial planner’s website and see what services they can expect to receive for the fees they expect to pay? Shouldn’t the profession evolve a pricing model where people who do more for the client can charge more, and those who do less will charge less?

My thinking on this topic goes back 15 years, to when Boston Globe columnist Chuck Jaffe (who moved on to MarketWatch and now hosts his own investment-oriented radio show) called me up and asked an interesting question.

“Bob,” he said, “I’m confused.”

“About?”

“I’ve got these two well-respected financial planner types here in town that I’ve been talking to for years. They’re both fee-only.”

“So what’s confusing you?”

“They’ve been telling me about their services,” he told me. “One of them does full-service financial planning, soup-to-nuts, including estate and gift planning, and the financial plan is updated every year. He also manages client portfolios, using mostly index funds. The other one,” he said, “only manages client portfolios, using mostly index funds.”

I confessed that I was having a hard time seeing the problem. “So?” I said.

“So,” he said, “they both charge the same 1% or so of assets under management. I think the clients of the first advisor are getting a great deal,” Jaffe added, “and the clients of the second advisor are getting overcharged. But I wanted to check with you to see what you thought about it.”

Today, a decade and a half later, consumers are still facing what I’ll call the Jaffe Dilemma. They’re still trying to figure out what services they can expect from a financial planner, and how to measure the value of what they’re paying for. The situation is complicated by the fact that even pure asset managers will do a perfunctory financial plan that mostly assesses how much a client needs to accumulate in order to afford retirement – surely the most basic of all financial planning calculations, but it qualifies under some definition of “financial planning.”