How that strategy worked out for you in 2008?

I am not trying to be an ass but there are much better strategies out there. 

So you are more comfortable buying an entire index of winners and losers rather than picking the best of the breed? (obviously if you dump people into mf and etf do not say this) 

You are correct that fees will only decrease your real returns but if you are used to getting a 8% ROR and I can produce you a 12% ROR wouldn't be safe to say you would not mind paying my fees?

These types of people would be bad clients, generally always calling and asking stupid questions.  So unless it is a huge account I would just smile and say "your absolutely right" and move on to the next one.

Njh is 100% right, including the fact that they could be bad clients. Always remember that you can’t be all things to all people. Oftentimes these people may not want to pay an advisor and that’s fine. However, if you sell your PROCESS, perhaps that’ll open their eyes. Offer financial review, retirement calculation, ask them if they’re on track to their goal, or have they established a goal? Ex: I want $20k in a 529 in ten years. Offer life insurance reviews, etc. If they want to stay at the no-load place, fine. But you have other things you can offer (if you want to).

Correct and Correct.  Don't waste your time.  They are time suckers.  You can spend a year convincing them you can do better than them and they still won't do business, and never intended to - They want ideas and validation that what they are doing is right.  Give them the Bill Good...  Thankyouverymuch. Click.

Whenever a client starts making decisions about their investments with me, I tell them to go to etrade and pay $10.  My 1% is much more than that.

Work with people who value your opinions and recommendations - Life is too short to deal with people who "THINK" they know what they are talking about.

Try this rebuttle. "Even if the total rate of returns on index funds and some of the managed mutual funds out there are similar, without the help of a financial professional, most individuals end up buying and selling those index funds at the wrong times, and YOUR rate of return will almost certainly be much less than what I can provide you over the long term. Not to mention, you get access to a financial PROFESSIONAL, instead of having no one to turn to when you have questions or need help. I do agree with the above though. This type of client, unless he has a substantial amount of money, and even so, will probably be more of a problem than hes worth.

[quote=pjane007]

Ok, I have had this type of objection come up recently and I wanted to see some of your responses to this objection.

I make a cold call and the person says “I invest with Vanguard or Fidelity index funds, make my own selections, I like the low cost and I have heard index funds do just as well as actively managed funds. I don’t want to pay any loads or advisory fees, I think those fees only decrease my real returns.”

Ok, I know several of the key reasons why it is not wise to do 100% passive investing. However, these people seem very stubborn in this line of thinking. What type of responses have worked for you when you get this response?

Thanks

[/quote]

1) You are never going to make everyone you speak to a client; nor, would you want to.

2) I'd offer this person a chance to meet over a cup of coffee, explain your process and what you do for clients, and see if they might appreciate that instead of what they're doing now on their own.

There is no reason why someone who wants to and is reasonable good at it can't manage their own investments for a lot less than you'll charge them.  But, it boils down to this and this is why clients work with an advisor in the first place... they either a) don't want to do it on their own, b) can't do it on their own or c) realized that having you as their advisor will maintain their sanity during tough markets.

We're going to continue coming across people like this and my take is that they're usually not good clients to begin with.  I took on a pretty nice client a few years ago - roughly $700k all fee-based.  The couple had money scattered among 30 different accounts and I consolidated it down to only 5 or 6 after all the ACATs were in.  We built a well-diversified portfolio for them but the client would call me EVERY DAY about little nonsense.  Personalyl, it's not worth the headache. 

If it was me!

You seem like someone that believes he's pretty knowledgeable about handling your own investments, right? 

You'll probably get some sheepish answer in the affirmative like "I hold my own". 

"Okay then I'll make a deal with you. I'll tell you right now one of my creative strategies right now, if I impress you, then you agree to a meeting with me and if I continue to impress you in that meeting then you also agree that if you execute one of those, I get to be the one to do it. Deal?"

If no, okay thank you, click. If yes, I chuck out one of over a dozen strategies I have(probably on the tax side). I'll get him to be impressed and book the meeting. Somebody like that I either want a yes on a meeting now or NO.

Otherwise I would go in the when to enter exit rebuttal.

Or I would target the life side.

Otherwise I don't give a damn and he can continue to be DIY passive management kool aid drinker. The only reason why I would even grant a meeting to someone like that is because I would tear apart the index fund thesis so fast in that meeting it wouldn't be funny. Since he's reasonably smart then he's one that a good strategy he hasn't heard will actually be very appreciated. And because he is a price chasing penny pincher I could drop about 10 strategies on his lap that would have him sold on me. This is all assuming I have ascertained that he is DIYer because he thinks he's smart and not because he thinks that financial professionals are out to skim money off of him.

Well said Denny. Are you a commission guy or a fee-based guy?  Cold-caller?

They're a waste of time. Generally speaking, these types of clients are rude and wouldn't hesitate filing a complaint regardless if it was warranted or not. The few that I have come across the die hard DYIs tend to think they are mini Buffets. Just like the gambler that's always at the casino, they're always up.

Talk to them, feel them out, push back on their knee jerk reaction. If it actually opens up then I think you're ok to proceed to a meeting. If they're antagonizing you and very defensive then I'd let it go. No reason to waste time on someone that won't every seal a deal.

I wouldn't waste a whole lot of time. When I first started I would waste too much time with these people. Think about that cup of coffee. That could be 30 to 45 minutes. How many dials could I make in that time? How many prospects could I be qualifying?

Here is my response... Best of luck to you... Click.... Or the aforementioned: Thankyouverymuch. Click.

Everything we do is about a return on your time. If I am going to take time to meet with someone it must lead to bringining in money. If it is to shoot the breeze it is not going to be done during business hours. Period.

The most I would do, if I knew they owned a business doing 25mm plus a year in revenue, I would ask them something about their succession plan. Generally I would move on.

This also comes back to "who are you targeting?"

Dear sir/madam,

You are among the very few people happy with their current fees etc...I guess you should be thankfull for that.

so..if you will listen to me for some minutes you would not lose anything but you will make sure that you have chosen the best solutionfor you.

Things like that...just make him or her feel safe, not attacked. That is a defensive position from a client. So...offer him the possibility of reassuting himself that he is right in his current decision. he will tell you his concerns in minutes

You're probably a very good investor.  I bet you beat most professionals with you passive strategy.  May I ask you a simple question?  Would you like to know how much of your portfolio the government is going to confiscate?  I mean, does it matter how much you make if you and your family aren't going to get to keep it? 

Jerry brings up a good point. He may be a DIY and making some great trades and racking up quite the short term capital gains taxes. But, he probably doesn't know how to manage the "taxability" of a lot of his investments. If he's a whale try pitching a wealth management approach and how you can work with his CPA and estate attorney to help alleviate taxes. Appeal to greed. Generally in the case of the DIYer, the only thing they like more than proving to everyone how brilliant of a stock picker they are is sticking it to the government from taking their money.

If no appointment after that then fk'em, move on.

Usually, move on. You are wasting your time with the Bogleheads. they;ve got all the answers.

My approach in seminars, workshops etc is to refocus them on a different cost. That is the cost of their time. Our investment programs are run by the smartest investment minds on the planet. They've graduated from the best schools, and dedicated themselves to their craft. They are experts who work in the financial arena full time. For those who want to do this on their own, even if you could match the performance of these experts at the risk level taken, how much time would it take? How much time would it take for you to match experts who do this full time? And then ask yourself, is it worth it? For about one percent a year you can hire those experts to do it for you. If you've got nothing better to do with your time than learn the financial investment world from the ground up, then come up with a process for investing, and then spend 20, 40, 50 hours a week doing all the leg work to match the experts, well then go for it! But, if your time is worth more to you than the one percent that you can pay someone else to do all that for you, well, maybe we've got something to talk about. And, you've definately got something to think about.

Add in leisure time,  time with family, for professionals ie doctors how much is your time worth per hour?

Only do this in person and usually to a group. I'm not about trying to change the world. on the phone -thankyouverymuch-click-dial tone The easiest person to sell a BMW to is a BMW owner. If you are selling BMW's that's who you look for. You will never convince a Lexus owner that the BMW is better, even if it is.

I know I am late to the conversation, but  I work at a Fidelity phone center, who will be leaving in a few weeks. Obviously, it's hard to win on fees and online trading.

You need to approach them on areas that these type of investors and Fidelity are not strong:

- Financial planning around the non-investment areas like estate and tax planning: For example, these investors don't add beneficiaries and their spouses know nothing about handling an account transition/investing. Or, everything is in a living trust/ or estate and the successor trustees/or executor don't know what to do next once DIY investor dies. Upon death they put everything in MM and CD's or cash out the IRA.

In addition, DIY'ers typically don't know how to efficiently draw down an IRA when they reach the required beginning date. The client may like being on the phone or online with a service rep but their spouse and children might not.

- Customer Service: Fidelity and Vanguard spend  alot on training their customer service reps. I felt I came out with a lot of experience (licenses and CFP). They are knowledgeable in their paticular department but there are several departments (401K, Portfolio Advisory Services, Equity trader, Mutual Fund Trader, Retirement Services, Inheritor Services, etc)  and a DIY'er has some experience with someone dropping the ball or F*ing up some request.  Plus, unless a DIY'er is in a managed account, Fidelity does not provide "advice" but instead "guidance."  In other words all of their asset allocation models or recommendations are cookie-cutter.

For the record, I think Fidelity is a wonderful place and they treat their employees very well and have excellent benefits. I am leaving b/c I have taken too many service phone calls.

In the immortal words of Bill Good I believe the correct response is

"Next ?! "

you LOSERS remind me of why I am a boglehead. As I let sharks like you all swim by I just crossed 2.5M

Stay the course has obviously worked just find for me!

[quote=floatingdoc]you LOSERS remind me of why I am a boglehead. As I let sharks like you all swim by I just crossed 2.5M

Stay the course has obviously worked just find for me![/quote]

See… this is the proof that the correct response to someone like this is … “NEXT?”

Don’t worry about those. They won’t be your clients, and if they are, they’ll give you a tough time. Just move on.