If a client needs to obtain a return of 6% to reach every financial goal she has in life and your portfolio returns 6.5%, have you not provided alpha? How about the clients who use their time in pursuits that they value and enjoy, rather than agonizing about their portfolio? Is that not alpha? Is the coordination of clients’ estate plans in a way that supports their values alpha? Is being tax efficient alpha? How about helping them with their business plans? Isn’t that alpha? Or giving them advice on whether to buy or lease a car, helping them find or refinance a mortgage, helping them discover their core values and goals or helping them in their charitable endeavors? Or doing all the other things that financial life planners do for their clients that are too numerous to list here? Or perhaps the most important of all—giving them peace of mind?

Are these not all alpha?

Can I put a numerical value on all of the services we offer? Of course not. But I do know that financial life planners who perform all of these non-investment services for their clients do not need to be in the fee justification business by claiming to deliver what they most likely cannot.

One of our clients managed his own portfolio for years (and did a good job), but hired us so he could devote more time to his practice and family. During the bear market of 2008-2009, he called to tell us how happy he was that we were the ones that needed to make the tough decisions about his investments and not him. That was his alpha. We showed another client he had enough money to establish a scholarship endowment for his alma mater. For yet another client, our alpha was helping her set up an ESOP for her company, and for other clients it has been converting traditional IRAs to Roth IRAs when appropriate. The list can go on and on, and you will have your own examples. The next time you are concerned that your fees may be too high, I suggest that you review the list of all of the services and value you provide for your clients. 

Roy Diliberto is the chairman and founder of RTD Financial Advisors Inc. in Philadelphia.


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