"You need to understand what you’re in the market for and what
level of support you want before you start negotiating," Welling adds. Advisors
are more likely to negotiate fees for investment portfolios starting at $5
million, because those investors’ situations are usually more complex and the
level of advice often extends beyond the assets. "Very often, if you fixate on
the pricing, you can overlook what’s really most important, which is what level
of advice and support do you really need based on your financial situation." Wilson and Keller agree. Their firms offer a full scope of
wealth management services beyond investment counsel, including advice on tax
preparation, estate planning and a variety of other specialized services catered
to a client’s specific needs. Investors should translate that additional
expertise into more perceived value, Keller says. He predicts many firms will
have to raise their minimum investment level if fee negotiation becomes an
enduring trend. Firms simply can’t afford to provide clients with the level of
service they require if they aren’t paid enough. Ron Roge, chairman of R.W. Roge & Co., a financial advisory
in Bohemia, N.Y., predicts that investors’ focus on fees will drive more firms
to commoditize themselves in an effort to compete on price. Roge’s company
provides a full range of wealth management services for a fee based on assets
under management. The firm manages a total of $250 million of discretionary
assets. Roge will not negotiate fees, and says he rarely encounters clients who
ask. "I think I’ve only had three or four people ask if fees are negotiable," he
says, although he concedes that competitive pressures to reduce fees exist in
the industry. Tactical Advantage
When clients apply business tactics to their negotiations, as
Denove did, they are more likely to win their argument, Keller says. Clients who
can substantiate their request with other quoted fees from the competition, for
example, demonstrate that they’ve done their homework. "Being in the business,
we know if they’re being straight up with us," Keller adds. Additionally, the
more money investors invest with a single firm, the more likely they are to
obtain a reduction in fees. According to Welling, a recent Schwab study found five factors
that most affect variation in price: the size of the relationship; complexity of
assets under management; type of services offered; level of customization; and
other fees involved in the relationship, such as financial planning, bill paying
and estate planning fees. "The entire relationship is on the table—everything is
customized," Welling says. "The advice is customized, the circumstances in terms
of the range of services are customized. Just like any highly customized
service, they’re negotiating a fee based on some very specific levels of
service." Investor Jack Croul, 82, of Newport Beach, Calif., is satisfied
with his current financial institution to the point where he feels no compulsion
to negotiate a lower fee. "I’m fat, dumb and happy," he claims. Croul began
investing with Morgan Stanley in 1996. When he sold his company in 1999, he
enlarged his portfolio with the firm. Croul was part owner of Behr, which sells
paint to Home Depot. His partners conducted negotiations with the retailer, a
process they found exhausting, Croul says. Though he understands negotiations
are part of doing business, he says he has no idea what his fees are, and
prefers the status quo with his advisor because he’s pleased with the
performance of his portfolio. He meets with his advisor once a month. "We’re
making changes all the time," he adds.
Martel is a Certified Financial Planner and the author of
The Dilemmas of Family Wealth: Insights on
Succession, Cohesion and Legacy.  Back to Main Article: The
Secrets of Negotiating with Your Financial Advisor
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