Re: You think your advice is valuable? Prove it

The instinct behind Stephanie Holmes-Winton’s most recent column is understandable. When CRM2 rolled out, firms like Vanguard created marketing plans like “Advisor Alpha,” suggesting advisors add about 3% value. They said things like asset allocation, behavioural coaching and regular rebalancing provide clients with value measured in basis points.

Then professional associations said investment management was a small piece of the puzzle. They argued that tax and estate planning, cash flow optimization and appropriate insurance provided even more value, and that it could be measured in dollars. All that did was put the industry on the defensive. It wasn’t about providing value. It was about justifying it.

Any attempt to counter fees in dollar terms with value in dollar terms is defensive by nature. You can’t win on those terms because the moment you compete on measurable value, you’re in a race to the bottom. There will always be a cheaper option. Robo-advisors figured that out well before advisors did.

The more important question is what clients actually value. There isn’t a way to measure — in percentage or dollar terms — the peace of mind advisors provide, how advisors filter out the noise, how they stop clients from chasing returns or how they keep clients invested when the world goes sideways. None of that shows up in a dollar figure on a statement.

But ask someone who went to GICs in 2008 and never came back how much they would have valued a good advisor.

Josh Brown put it best in 2018 when he said advisors don’t earn their fees during the routine days of the year. They earn them during the critical ones. The moments when a client wants to liquidate everything, chase a hot trade or go to cash in the middle of a bear market.

Nick Murray makes the same point differently. A good advisor is insurance against that one big financial mistake. Insurance on a $3-million house costs more than on a $300,000 condo.

The days where advisors provide that critical bit of advice can’t be known in advance, but when they arrive, the value of that advice isn’t measurable to the client. It’s everything.

Clients will see value in the services Holmes-Winton describes. Cash flow planning and debt management advice are valuable and necessary, but they aren’t quantifiable.

The advisors who aren’t worried about CRM3 have always done what Holmes-Winton is telling them to do. It isn’t a CRM3 strategy. It’s doing your job. The advisors scrambling to build a CRM3 strategy around cash flow plans are solving the wrong problem.

Clients decide the value their advisor provides, not advisors.