Responding To Concerns About Fees And Active Management


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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Active Management

Dear Bev,

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We are under siege. Clients are focusing on fees and our active management approach like never before. Our clients think they are more educated but we know they are not. We have always been fee-based and we charge a separate fee for creating a financial plan. We work with insurance carriers when our clients need it. We are very ethical and diligent in our approach, but having everything questioned gets under my skin. We would never take advantage of the clients we serve –we see ourselves as the protector of their assets. How do we confront these misplaced allegations and get back to the business at hand, which is preserving capital and making our clients more money?

Frank D.

Dear Frank,

“Under siege”? This is an interesting choice of words and gives me some insight into your state of mind on this matter. I completely and totally respect your view and your frustration. It’s hard for anyone to think they are being accused of something untoward when really they are trying to do the right thing. You sound very passionate about your business and your approach and your clients’ questions suggest that they don’t fully understand all you do.

That said, you are certainly not alone. The entire industry is “under siege” to some degree. The flow of assets from active to passive continues unabated. Research dating back to April shows outflows from active strategies of close to $35 billion. And it is reasonable for clients to ask about fees. If they don’t see their assets outpacing the S & P or other measurements, it is a natural reaction to ask why they are paying 1-1.5% for active management.

All of this said, I’m not suggesting that you are wrong or that your clients are wrong; I’m just trying to show objectively why their concerns are not a reflection on you or an insult to you.

Article by Beverly Flaxington, Advisor Perspective

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