Advisors worrying about Vanguard’s disruption to the industry should focus on what the low-cost asset management giant can't offer: life coaching.
Helping clients answer the big, soul-searching questions – such as the meaning of life and the priority of family and work questions – will be what differentiates advisors from low-fee money managers, according to Joe Duran, CEO and founder of United Capital.
Speaking at Financial Planning’s Disrupt | Advice conference in New York City, Duran said the most successful advisors help clients stay true to their ideals. That means asking clients questions beyond money such as “what do you want your life to be like” and “are you doing the things that you say are important?”
Advisors should not shy away from persuading clients to take a vacation, spend more time with family, or forgo a big house to pay for kids’ private school tuition, Duran said. “We want to build a business that helps people to live rich, rather than die rich,” he told the audience.
UNDERSTAND IDEALS FIRST
Founded in 2005 and managing about $20 billion in assets, United Capital has been promoting its concept of “financial life management” as it expands while gobbling up smaller RIAs nationwide.
Only after understanding a client’s overall ideals should advisors proceed to more technical questions, according to Duran, such as “do clients have the resources to live that life?” and “are they prepared for life’s surprises?”
The rise of Vanguard has changed the financial planning industry as it undercuts fees with an average expense ratio of 0.12 percent. In the past seven years, its asset under management rose from $1 trillion to over $4 trillion. Among the $1 trillion inflows to ETFs, about $900 billion went to Vanguard in the past four years.
Rather than competing in a price war, advisors should charge what clients value, which is life guidance and planning, Duran said. That should allow advisors to be able to increase their fees, Duran maintained.