CRM2: Don’t wait for your clients to ask about fees and performance.

Tough questions CRM2 reports

Many financial firms across the country have started mailing out the new CRM2 Fee and Performance Reports. When clients review their reports, some advisors may face tough questions ... especially from clients with sticker shock over their fees. Or, worse yet, what about the clients that advisors don’t hear from? That doesn’t necessarily mean they don’t have any questions. They just may not have opened the envelope yet or paid attention to the report. Or they may be unhappy about what they see but hesitate to call. 

It’s difficult to predict how individual clients will react, but there’s still time for advisors to reach out and address their concerns. For clients with upcoming review meetings, this is the opportunity to walk them through the fee and performance information and tackle their questions. Whether you talk to your clients now or over the next few months, here are some suggestions to help you have comfortable, confident conversations about fees, performance and the value you provide.

Remove the mystery around fees

You may have talked about fees in the past with your clients, but it was probably in percentages. Fees are now shown in dollars. Don’t wait for them to ask questions. Take the lead in the conversation with your client about their fees. Don’t get too technical or detailed – keep it at a high level, while still being direct. 

  1. Fees they pay directly – this could include account operation fees, transaction fees or fee-based account fees.
  2. Fees they pay indirectly – this is shown in the section called “Compensation received from Third Parties”. This fee section raises a lot of questions for clients … especially if you’ve never explained that you receive embedded fees such as trailing commissions for their purchases of mutual funds.

Explain the benefits of the new personal rate of return

The new reports also show performance returns calculated on a money-weighted basis. We would suggest you refer to these as personal rates of return, rather than using the technical term “money-weighted rates of return”, which clients don’t understand. These returns reflect the client’s contributions and withdrawals, and are calculated after their fees have been deducted.

Your clients may want to connect their investment performance to the fees they paid. Instead, demonstrate how these returns can be used to track a client’s progress toward their goals. If they don’t have a financial plan, this is your opportunity to create one for them. 

Demonstrate your fee-worthy value 

The new transparency around fees makes it imperative that you articulate to your clients the value they receive for the fees they pay. Be specific about all the different ways that you provide value. Create a list of all the things you’ve done for a specific client throughout the year - they don’t remember.

Be sure to include the “intangible” or hidden things you do behind the scenes to make investment recommendations and adjust a client’s portfolio to reflect their changing needs – clients don't understand what you do for them when they’re not with you. This will help you demonstrate the "fee–worthy value" you provide.

Get a CRM2 Navigator Money in Motion Assessment

You may not hear from clients right after they receive your firm’s CRM2 reports – but you can’t assume this means they don’t have any questions, nor that there isn’t a risk of money in motion.

If you're unsure of how your clients will react, ask about our CRM2 Navigator Money in Motion Assessment. We’ll help you identify the danger zones and coach you on how to have comfortable, confident conversations with your clients about fees, performance and the value you provide.

Money in Motion Assessment