Time to switch?

From a regulatory standpoint, I need to be aware that in a commission account when I want to move a client’s portfolio in a timely manner, there is the possible perception of account “churning.” The fee-based approach enables the institutional managers to do as they see fit based on the risk tolerance and goals established by the client. It is a more proactive approach that helps clients better defend against risk.

My practice includes both fee-based and commission-based business, but my fee-based business is much stronger at about 70 percent to 80 percent. In a fee-based account, I will rarely take on a client with under $150,000. Frankly, I believe when a portfolio is valued at less than $150,000 results can be achieved with mutual funds or ETFs. 

Build trust

In the fee-based market, I actually work harder to achieve success because consumer confidence toward the financial services industry is still very low. I am constantly working to establish a comfort level in the stock market. People are more reticent to trust Wall Street. After establishing their initial portfolio, I meet or speak with my clients on a quarterly basis (some semi-annually depending on their need) and make tweaks, as needed, based on changes and/or their overall appetite for risk in the market and portfolio performance. Clients need guidance to recognize that investing today is much different than in years past. They may question the fees because they will be able to actually see them now, whereas with mutual funds they may never see the true cost.

Freedom continues to be an advantageous consideration with the managed portfolios. When I first started, I could not leave my desk and always needed to be “on call” to make timely transactions on my client’s behalf. The institutional traders behind the scenes modeling these portfolios are moving them very quickly and, consequently, I am not tied to a computer anymore. Now that I travel more extensively, this change truly makes a difference. This is a tremendous benefit from an advisor standpoint.

The financial landscape is ever-changing. Many clients are looking for additional guidance and insight into financial products and services. It may just be time for you to consider the switch to becoming an Investment Advisor Representative. The fee-based approach allows you to shift the burden of day-to-day transactions to third-party money managers and leaves time for you to strengthen client relationships and provide the ongoing financial advice your clients crave. Above all else, time is everyone’s most valuable asset.