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Advisors Need to Quantify Their Value

At a recent TRAU C(k)P session, the question among experienced advisors was how to stave off the trend of diminishing fees by showing value to clients.

One advisor said that they have started creating a list of various services they provide, the number of hours they expect to expend and the prices they charge. It gives clients a good understanding of what they are getting for their money, and helps put a stop to the annoying trend of a less experienced or even unqualified plan advisor telling the plan sponsor they will charge far less. Now the plan sponsor can share the list of services they get from their current advisor and ask for a comparable bid. Better yet, plan sponsors should ask the other advisor to show how they will perform the comparable services, complete with lists of staffers, capabilities and other clients who receive the same services.

Not only will most inexperienced advisors be unable to match the services being provided by an experienced incumbent, it will highlight the value currently being received. Not coincidently, that advisor was the only one in the class that not only is able to maintain its price point, but is actually increasing pricing.

One of the issues is that many plan advisors are paid through revenue sharing. This means that employers rarely write a check, further confusing things.

The services provided, the capabilities of the advisor and the fees charged become very transparent through an RFP process. Experienced advisors should get behind this trend, not just for prospects but also for clients. The clients lost will be those that do not appreciate the quality of services being received. As far more plan sponsors realize, you get what you pay for.

The opinions expressed are those of the author and do not represent those of NAPA or its members.

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