What does It Mean to Me to Be A Rotarian

When I first had this idea for the members of my Rotary Club to talk about what it means to them to be a Rotarian it was actually in response to the question: What is a Rotarian? Of course my answer (elevator speech) came right from the published material we all have seen and read at least once; espousing the four ideals (objectives) of Rotary: Opportunity for service, High ethical standards, Ideal of service in our personal life, community, and business; and advancement of international understanding, goodwill, and peace.

The person then said to me, "No, no. What does it mean to you?" I was taken aback somewhat but recovered and answered, "Rotary allows me the opportunity to give back to others what I have been blessed to receive". I went on to say that my service (and that is what it is) in Rotary continues the trend in my life of serving others. These activities include the military, church and the Boy Scouts of America. I am still involved in the church but left the Army many years ago and when my son matriculated from Scouts as an Eagle Scout I was looking for another avenue of service. I came back to Rotary. Joining Rotary is more than meetings and service projects. I enjoy being around like-minded people who look outward for fulfillment of their life purposes. Rotarians fit that mold. I hope I do as well.

What does it mean to me to be a Rotarian: Service Above Self through Living the Four Way Test.
Is it the Truth?
Is it Fair to all concerned?
Will it build good will and better friendships?
Will it be beneficial to all concerned?

That says it all - What it means to be a Rotation and the standards to follow.

Appropriate Fee Structure for Investment Advice

Back in December when I was working with an investment firm, we were going through the initial stages of the planning cycle and we had a discussion about their fee schedule and its structure. As we continue to discuss this issue we examined their goals and where they needed expend their energy in efforts to serve current and future clients. This is closely tied if not directly linked to the firm’s mission statement in terms of client service and client retention. The feeling at the time was they had to differentiate themselves through investment performance/style as well as providing a level of client service competitors s are unwilling or unable to provide within the specific client niche. This discussion returned to the forefront as a result of reviewing the Investment News (Vol 13, No 17, April 27, 2009) on fees developed and charged within the industry.

This particular firm is enjoying the benefits of superb investment results of the last 5 years and the last 18 months in particular but they need to be able to offer the services clients need and/or desire from the firm. What services to offer, either through proprietary own efforts and skills or through strategic partnerships, has yet to be fully explored and discussed. Additionally the firm leadership must examine the full cost (fixed and variable) of these services and the cost/benefit of offering them to current and future clients. Another related issue is whether to offer these products and services to all clients? Does the firm then further segment the client base into those who only get asset management and then those clients who receive varying levels of service (À la carte client service)?

What is an appropriate fee for a firm’s listing of products and services? Is the asset management fee competitive or is the firm actually under-charging clients and subsequently not being compensated adequately for what they offer clients of the firm?

Investment management is, in general, a commodity. Most advisors (RIA’s) offer asset allocation, models of mutual funds/ETF’s/etc through a wrap program and do not offer individually managed portfolios (which we obviously do). Many of these competitors also offer outside managers through a platform based approach but still charge a fee for their services in bringing the platform to them with an ambiguous pledge to provide services. These fees are for very basic services.

I believe advisors try to offer more but we also do not know how to price their services in order to be more profitable. I disagree with the statement in the article that charging clients solely for asset management is not worth 75 to 150 basis points. It may not be worth it if the investment management is not unique or chronically underperforms and the client subsequently fails to meet their financial goals. It is also not worth this fee if that is all the firm offers but that is not the case. I like to think most advisors are available to clients to answer their questions, make decisions on their behalf and to anticipate their needs based upon their desires and goals. I do not feel a sense of guilt for charging them a competitive fee for what I can offer, even if the client does not avail themselves of the services. It is enough, in my view, to offer the services and be prepared to deliver on the offer. A firm needs to evaluate what it is able to offer and answer the following questions:
Can we provide the service in a competent and timely manner?
Can we offer the service through a strategic partner?
Can we provide the service and make a profit?

Fees need to be aligned with the business model, or net income goals and subsequent ratios used in evaluating the firm’s success. Without this analysis a fee structure can be viewed as arbitrary and probably underpriced for the value the client receives or perceives the advisor brings to the relationship.

Remember: If a client pays too little for a service/product then the client will place little value in that service and the firm. This is indeed a very fine line to tread.

Client Retention and Client Service

I am process driven. In this particular area (client service/retention) a business can succeed by following the simple rule of treating each and every client as if they were a new client. This will ensure that each client is valued and treated as such. We all know that it is far easier and less expensive to retain a client than to search out and land a new client. Yet we forget this once a client comes in the door and transfers assets to us to manage. Yes, client segmentation does allow us to place clients into profitability buckets but the process for this must ensure that the client is still given the service and products they were seeking when you sold them your business. Consistent application of processes and procedures will ensure the client experience is preserved throughout the life of the relationship.