Price: The Other Side of the Balance

Transcription

1 Price: The Other Side of the Balance 2017 Partners Forum Bonita Springs, FL Peter McGratty CFA, VP of Strategic Partnerships

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3 Agenda Are MY fees reasonable? How important are fees to clients? How important is it to discuss fees? Why can discussing fees be uncomfortable?

4 Are MY fees reasonable?

5 Strategic Partners Published Fees for $1M Clients Source: The 2016 Fidelity RIA Benchmarking Study & Pinnacle Advisor Solutions research.

6 PAS Strategic Partners Offer Competitive Prices Fidelity All Fidelity < $250MM PAG PAS Partners $500K 1.00% 1.00% 1.30% 1.09% $1MM 1.00% 1.00% 1.08% 0.98% $2 MM 1.00% 0.97% 0.95% 0.86% Source: The 2016 Fidelity RIA Benchmarking Study & Pinnacle Advisor Solutions research.

7 2015 RIA-in-a-Box Study Average Portfolio Mgmt Fees

8 Advisory Fees by Broker 2015 Personal Capital Study

9 Investment Costs are Competitive Active Dynamic DFA Strategic Dynamic Since Inception in 2002 Mutual Prime Global 60/40 Market Market Thru December 31, 2016 Funds Moderate Allocation Moderate Moderate Management Fee 0.44% 0.45% 0.25% 0.30% 0.35% ETF / MF Expenses 0.05% 0.35% 0.25% 0.20% 0.20% Other ETF / MF Fees 0.30% 0.00% (0.21%) 0.00% 0.00% Transaction Costs NA 0.05% 0.00% 0.00% 0.01% Total Investment Costs 0.79% 0.85% 0.29% 0.50% 0.56%

10 And Returns More than Pay for Investment Costs with Less Risk DFA Tactical Strategic Dynamic Dynamic Since Inception in 2002 Global 60/40 Universe Benchmark Market Market Prime Thru December 31, 2016 Allocation ** Moderate Moderate Moderate Moderate Moderate Gross Returns 7.28% NA 6.60% 7.76% 8.27% 7.84% Expense Ratio 0.29% NA 0.00% 0.50% 0.57% 0.90% Annual Return, Net 6.99% 6.59% 6.60% 7.26% 7.70% 6.94% Std Deviation 10.11% 9.04% 8.38% 9.22% 8.92% 7.30% Sharpe Relative to Benchmark Beta NA NA NA 109% 104% 83% Alpha NA NA NA 0.15% 0.79% 1.12% Max Drawdown (2008 / 2009) (38%) NA (33%) (35%) (29%) (24%) * Back-tested data for Strategic Market and Dynamic Market use actual indicies less 0.30% expense ratio. ** The DFA fund starts on 6/30/2004. The DMG benchmark is used as a proxy for 10/31/2002 thru 5/31/2004 to allow comparisons since the inception of our strategies.

11 Fees Haven t Really Changed 66% of survey respondents said they have not changed prices in the last 5 years.

12 Effective Fees Last 5 Years

13 Are They Expected to Change? 76% of respondents indicated they will not change prices during the next 5 years.

14 How Important Are Fees to Clients?

15 74 % say a good value for the money is more Important than having the lowest fee

16 Fee/Price is NOT a Top-of-Mind Criteria 1 Relationship 97% Is Upfront with Me and Represents Situations Truthfull 2 Relationship 96% Understands my Financial Needs and Goals 3 Relationship 95% Acts and Performs Consistently 4 Relationship 95% Has a High Level of Integrity 5 Relationship 95% Has My Best Interests at Heart 6 Relationship 95% Welcomes Open and Honest Communication 7 Execution 91% Follows Through on Goals and Promises 8 Capability 90% Works for a Reputable Firm 9 Execution 89% Keeps Me Informed on a Regular Basis about Investmen 10 Capability 89% Is knowledgable About New Innovative Investment Pro 11 Capability 84% Is a Top Performer 12 Price 76% Charges Low Fees and/orcommissions 13 Capability 61% Is Highly Recommended by a Family Member; Friend o Source: State Street Global Advisors Survey, Financial Advisors Value Proposition and Compensation, August 2014

17 How Important Is It To Discuss Fees?

18 How Often Do Fees Come Up in Conversation? Source: SEI Consumer Research in partnership with Phoenix Marketing International April 2015, n=539

19 Client Fee Confusion While absolute prices are stable, the number and depth of services is increasing for the same price. The financial jargon used in describing fees is confusing. The press sends mixed messages, but mostly Fees are all that matter.

20 Services Vary Widely Regardless of Price

21 Advisors Charge the Same Fees For Different Service Bundles

22 Importance of Discussing Price An open and honest conversation about fee creates a foundation of trust. Clients who understand fees are... More likely to think positively about their advisor More likely to believe fees are fair More likely to view advice as objective More likely to refer their advisor

23 Why Can Discussing Fees by Uncomfortable?

24 Questions - Doubts Who could be worth this much? Am I doing that much more work? There are lots of other advisors smarter/better than me

25 What if someone discovers what a fraud I am?

26 IMPOSTER SYNDROME 1. Have a high degree of integrity 2. Take your fiduciary responsibility seriously 3. Truly care about caring for their clients 4. But you operate alone, no one in your office to talk to and doubts creep in

27 I Am Not An Imposter I will not compare myself to some mythical idea of perfection. There are not enough of us good advisors for people who desperately need our help. The reason it seems easy NOW is because of the work and time I invested to develop my skills Its not easy even for trained advisors. Its even harder for clients. Clients don t have the time or want to devote the time.

28 Remember Successes List the Clients You Have Helped Keep a Cheerleader File List Your Continuing Education and How That Made You Better Share Your Successes with Clients, Pete & Dale Look for What Led You to Be Lucky (Luck Favors the Prepared)

29 Remain Focused on Clients and Your Goals Helping Others Reassures Us of Our Value Even Set-Backs Can be Motivating Strive to Become More Indispensable Every Day

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