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Whats a good response to a client saying they can just use index funds and go to schwab vs using you at 1%? Do you use active funds? Etc

likeuplifting
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I tell him they should do that if they think that’s their best option. Usually that takes them by surprise. I then elaborate about what other value I add and how portfolio construction is a small portion of what I do for clients. Doesn’t work all the time obviously but it gets them to think.

likesmart

I’d tell them they’re correct. Let’s allocate an percent of there income equivalent to their age to a s&p low cost fund and the remaining percent of investable income to whole life insurance.

funnysmart

Well, if the only conversation you’re having is about funds and fees, that’s a losers game. The race to zero is here. However, clients will always pay a reasonable fee if you provide a valuable service. Have you had a financial planning talk with this client?

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What value are you providing? Seriously, this is a layup. Vanguard has a white paper on why you need an advisor

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1. I have yet to lose a conversation about returns. I'm very careful about how I screen my funds and only use funds that beat their index or category six or seven out of ten years. 2. As we all know, index funds are great and up yours but will get destroyed in a market downturn. 3. As has been pointed out above, my fee includes a lot more than just fund picking. A good financial planning relationship goes a very long way. 4. If all they can see is fees, then they're a bad client and wish them the best.

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Ask them if they drive the CHEAPEST car they could find?? Gee, why not? (They'll sell themselves on your quality of service and other intangibles.)

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What’s it like working at NML financial professional 1?

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PS That’s what all amateur investors believe in late stage bull markets. What did you believe on February 28, 2009?

likeuplifting

Tell them to go ahead! If they just want the lowest cost and that's what matters, don't fight it. Instead try to sell them some life insurance or disability insurance and see if you can squeeze a referral or two out of em

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“Ok. It was nice meeting you"

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American funds also did really good research on active vs passive. They found that the average fund doesn’t out perform the index but when you screen funds for high manager ownership, low fees and low downside capture (they call this select active) those funds beat indexes almost all the time. You can get good client facing material from your wholesaler on it. Of course their funds all excel in those 3 areas and they do more often than not beat their corresponding indexes. My personal preference is funds that meet the above screens for IRA money but etfs for taxable due to tax efficiency, I hate the cap gains funds pay every year and there are some pretty good active etfs that don’t pay cap gains, MOAT is probly my fav of those.

likefunny

Goodbye and good luck. If you ever feel investment advice is needed give me a call.

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I tell em go ahead

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Go in peace. You may be welcomed back when you really need me. No guarantees.

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Is schwab going to know their true risk tolerance, not just whay they wrote on a survey, and how to balance those ETFs based on that? Is Schwab going to give them financial advice and planning strategies based on your specific situation? Is schwab going to manage your emotions and talk reason into you when you are about to make the worst possible fincial move based on emotion and not logic?

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Financial Advisor 2, where did you get that wacky understanding of NM? I wouldn't be able to find a single NM advisor who would seriously make that recommendation. Joke about while showing the client to the door, yes.

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Your value is in helping them design and follow a plan that when followed will result in them reaching their most important financial goals. Investments such as index funds or active funds are part of that plan but their behavior is the biggest determiner of their outcome. You are their to make sure they do the right behavior - save enough, have the right allocation, stick with the plan in tough times, have enough insurance (term 99% of the time) to make sure the plan completes itself if they die, have DI insurance if they get hurt and loose income etc...... who cares if your fees are low if you don’t meet your goals. Check outNick Murray book “the new financial advisor” or “behavioral investment counselor” reading only 1 will do as they both have the same message

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1. Will they rebalance during ups and downs? Sell off gains in winner and buy more in losers? 2. So they have the discipline to stay invested when the markets drop? 3 Have they heard of tax loss harvesting? 4 How will they decide funds or their asset allocation? 5 What about index fund tracking errors 6 - MF to ETF - I’m agnostic, however the recent Neuberger Berman suggests otherwise. Screen active funds to find better chances to outperform In the end, use this conversation as a great learning opportunity

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Did you share you value proposition with the client? Ask them, when they meet with their doctor, lawyer, or CPA, do they expect them to provide their insight, professionalism or service for free? Last, when the market make a downturn, is that Schwab Advisor going to give them a call and offer advice? If that does not work, ask yourself, is this client a fit?

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If you’re not a money manager you probably aren’t worth 1% anyways. Most Financial Advisors these days are merely middle men...if you don’t set yourself apart then your setting yourself up for failure.

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