In every area of commerce, people value choice and transparency. We like to select from a wide pool of options that meet our exact demands. And we want to know what we’re paying for, with clear labels and nothing hidden. If that’s true for every consumer purchase from streaming services to grocery brands, shouldn’t it also apply to something as essential and personal as our financial futures?
As advisors know, that’s not always the case.
When assessing which investments suit a particular client, your choice is dictated — and restricted — by what’s on your product shelf. That shelf may be broad, but it’s not infinite. An advisor who selects from proprietary products is like a woodworker who doesn’t have all the tools, or the artist who paints with a limited palette. You may have fine results, but couldn’t you do even better with access to the full range of tools or colours?
Moreover, with many proprietary products the management fees may be higher. Clients want to put more of their money into their investments, not fees.
Advisors like to talk, as they should, about tailoring everything they do to each client’s needs and goals. Part of that involves service, and part of that rests on the ability to fit the product to the client — not fit the client to the product.
At Sterling Mutuals, our advisors aren’t tied to proprietary products. They can pick from the very “best in class,” from each investment category available in Canada, to help clients achieve their goals. They’re not handcuffed, and neither are their clients.
Some clients may not know the difference. Others want all the options open — especially high-net-worth individuals. Every advisor wants their business. You need something you can compete with, and a wide-open product shelf offers that. Clients know that you’re suggesting and assembling a portfolio filled only with what suits them.
Some advisors don’t really see the difference until they move from a proprietary-product environment to one like ours. They become wide-eyed. We’ve had advisors say they feel energized from knowing they can consistently offer the right choices to their clients.
Choice and transparency are related. When everything is open and clear, clients can feel that they have a fuller picture of what they’re getting.
Operating on a fee-for-service model, as Sterling Mutuals does, serves both advisors and clients. You’re separating the management fee from the service the advisor provides. That’s important for several reasons.
For one, with embedded service fees, some advisors might be tempted to sell a product with a higher trailer. Sometimes in proprietary shops, there’s an incentive to sell one product over another, but the client wouldn’t know that. A fee-for-service model demonstrates that an advisor isn’t in a possible conflict position, and is simply trying to do the best work for the client.
There are other benefits, like the ability to get into a different class of investments. Sterling’s fee-for-service program allows advisors and their clients to take advantage of F-class share mutual funds and ETFs with lower MERs.
In a mutual fund sold on a front-end load, clients also can’t break apart an embedded service fee. With a fee-for-service model they can, and they can deduct those fees against the gains of an investment. That’s a possible tax advantage.
Advisors also gain a competitive edge over costlier competitors, and likewise decrease the chance a commission-based competitor will take business away from them.
For advisors, a fee-for-service model can result in the same compensation, and puts them in the position to generate savings for their clients. The challenge — and the opportunity — is to explain to clients how they’re going to save overall, and to lay out the value proposition. Some advisors are reluctant to do so, but don’t be hesitant. By sharing how you offer value as well as choice, you can help to gain, satisfy, and retain clients.
This three-part series is looking at what can put advisors in the best position to excel. In Part 1, we discussed efficiencies that come from smart investments in technology and processes. In Part 3, we’ll look at the value of operating in an independent yet large environment.
Together, these three topics are about working within a truly supportive culture and being able to deliver superior experiences and outcomes for clients.
Learn more about how Sterling Mutuals can help advisors to meet their clients’ needs.