Stop Saying 1% – Spell It Out in Dollars!

I think the latter is the case, unfortunately. And then the custodians go along with it by allowing you to debit your fees out so that the client never realizes it.

Imagine how hard it would be if, on a quarterly basis, you had to show a client an invoice with the dollar amount they are paying and then ask them to input their checking account!

Most of you would be out of business!

Except, that is, for the tiny fraction of you who are either charging on a project or hourly basis.

It’s not about intelligence

Don’t try to tell me that it’s insulting people’s intelligence to spell it out.

It’s not.

The average person has no desire to do simple math in their head. Compound that with the fact that you are moving decimal places and dealing with hundreds of thousands or millions of dollars, and it’s total confusion.

They didn’t come to the meeting with a calculator and even if they did, it would be so awkward to whip it out and start tapping keys. As a result, they wind up just never doing the calculation.

Don’t say they’re bad at math and need you

And don’t even say some nonsense like, “Well if someone is so bad at math, that just proves they shouldn’t managing their own money. They need a financial advisor like me to swoop in and save them!”

Honey, pahleese.

That’s gaslighting!

And it would imply there is a baseline competence that advisors have and given the CFP designation is conferred by a political (not educational) organization, it’s questionable what the value of that credential is.

Check this out this LinkedIn poll:

For the record, there were advisors saying that 1% of $1,250,505 is $1,250.50.

Examples of transparent presentation of fees

Here are three examples of how to present fees more transparently. Get this approved by your compliance officer first, by the way.

Hypothetical portfolio value and its associated fee on website

Perform a sample calculation on website

Calculate it out, just like Timmons Wealth Management:

Fee calculator on website

Have a fee calculator on your website, just like Christman Financial:

Transparency is a competitive advantage

Transparency is not an accessory like a cute Birkin bag. It is the skin covering the body of your offering and it touches the client at every point of contact.

When we talk about transparency, we are talking about communication.

Transparency makes communication easier. It allows your presentation to follow logic, to fall in line with reasoning. When you speak transparently you make the obfuscators seem so weak next to you.

Hint: The competition isn’t the competition.

Transparent communication example

In these two examples, notice how emotion prevails over logic. This makes true communication very hard.

Advisor says: My services cost 1% of your AUM and includes comprehensive financial planning and investment management.

Client hears: So that’s going to cost me something… but it doesn’t sound like too much, just an itsy bitsy bit of my portfolio. And I’ll get stuff for that, not sure what it is, but sounds like a lot.

Advisor says: We provide value to our clients and will customize this service to meet your needs.

Client hears: Oh, they’ll make it exactly what I want. That’s sweet. I feel so special.

In contrast, check this out.

Advisor says: You will pay $8,000 a year and set a financial plan, a check in meeting each quarter, a risk assessment, portfolio plan, and ongoing monitoring.

Client hears: That’s the cost of a Disney vacation or a new boiler. Hmm, not too bad, I could probably swing that. But do I really need all that stuff for $8k? Do I really need a financial plan?

You can see how this conversation is tangible and concrete, not abstract and fluffy. Even though they are questioning the value of the service, it’s a sturdier position to be in because you are in real communication with the client.

The move to transparency is upon us

The space between what the advisor says and what the client hears is exactly where the advisory profession has fallen down. It won’t get any better until we take responsibility for communicating more transparently, to bring these two things into alignment.

Prospects come to an advisor because they need to be taken care of, not fed half statements that only confuse them or lead them the wrong way. It’s about time we take responsibility for fixing the problem that has driven the wedge between us and those who need us. All of us – advisors, agents, broker, fiduciaries, vendors, consultants, reporters. We all have to support the profession’s move to transparency if we’re going to see real change.

I’m sick of thought leaders.

I’m looking for ethics leaders, people who will fight to defend transparency, who embody and embrace it, not just talk about it.

Who’s with me?

Oh, it’s not your problem?

To the advisors who are going to sit there and say it’s not your problem – if you’re going to sit on the sidelines instead of fighting this battle, you’re going to find that one day soon there’s nowhere to hide.

Sara’s upshot

I’m organizing the industry’s first organized transparency movement, one that embraces the values of modesty, clarity, advocacy, and putting the clients’ interests first.

Join us on November 9th for a meetup where we talk about transparent business models of the future such as flat, hourly, or advice only planning. Even if you’re not down with these models, we still welcome you to the discussion. Sign up here.

Sign up and you’ll receive my monthly Transparency Letter which is written to educate advisors from all walks of life about how to communicate more clearly.

Sara Grillo, CFA, is a marketing consultant who helps investment management, financial planning, and RIA firms fight the tendency to scatter meaningless clichés on their prospects and bore them as a result. Prior to launching her own firm, she was a financial advisor.

Read more articles by Sara Grillo