When You Fear a Client has Dementia

Beverly FlaxingtonBeverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.

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Dear Bev,

We are receiving a number of inquiries from our clients about fees. If the market is strong, they don’t see the need to pay us, and if the market goes down or has a hiccup as it recently did, they are mad because they are paying fees and we can’t prevent the loss in the portfolio that might come along with a downturn.

I know it is the nature of our business but it always reminds me how terribly uneducated our clients are about how this works and what we do for them.

Is there something we need to do on an ongoing basis? Do you recommend when the market goes either up or down we proactively communicate? Do we just accept the fact that they aren’t going to get it and we don’t try to teach them?

It’s perplexing.


Dear A.J.,

You are writing about the eternal price versus value conundrum. A few questions about what you’ve done so far, in response to your questions:

  1. What steps do you take now to talk about where your fee goes, how it is calculated and what it covers? Even though the conundrum is known and recognized, I still see many advisors simply talking about “1% fee on AUM” and not much more. Are you helping your clients understand what’s involved in portfolio management and meeting financial goals? Are you explaining who is devoted to their portfolio and the time it takes to manage it effectively? I don’t know enough about how you run your firm, or how many people you have to help you with specifics. But make sure you aren’t assuming the fee is known and understood if you shared it once and have not talked about it again.
  2. What are clients saying about the fee? While your inquiry is general on the topic, I’ve found people are usually asking about something in particular. The client won’t always share what they are really thinking or they might use fees as a smokescreen. How strong are your relationships and are there any issues you are not addressing that you need to be?