Advisors who are open and transparent about their fees and services can develop long-lasting relationships with their affluent clients, according to Cerulli Associates.

Perspective clients with at least $100,000 in investable assets looking to bring on an advisor can get intimidated or confused by an advisor’s fee structure, the research company says in a new report.

The research found that 46% of about 2,000 affluent investors surveyed said that cost transparency is one of the most difficult aspects of working with an advisor. Meanwhile, 28% cited the general cost of working with an advisor.

“In the advisor space, [payment is] not in dollars, it’s fees and that can be a little confusing at times,” said John McKenna, a research analyst at Cerulli. “Advisors can offer a lot of products and a lot of help that you can’t get from a brokerage, but people need to understand the fee structure.”

A prospective client may not understand what a basis point is or how often their advisor charges fees, so advisors should explain their fee structure to clients in plain language and not overwhelm them with financial jargon, McKenna explained.  

An advisor must explain the services they provide because it allows the client to understand why they are paying those fees, he said.

“You have to really impress upon them the value-add of having an in-person advisor that you can talk to and who is looking at things from a holistic perspective and the all-out perspective rather than just percentages and lines on a chart,” McKenna said.

Cerulli found that just 11% of those surveyed who work closely with an advisor said that the costs are not transparent, while only 12% said they are too high.

“Once you become an advised client ... the worry about cost and the worry about expense does drift away because by that point, you’ve been with them enough times you have experienced what a financial advisor can offer you,” McKenna said. “In a sense, it does make it easier once they’re advised.”

If the client has that comfortable relationship with their advisor, they are not only likely to stay with them for years to come, but it also increases the likelihood that their spouse or children will continue with them after they are gone.

“[Strong communication] really does help build the relationship [as] it solidifies the relationship and makes the investors less likely to jump ship,” McKenna said. “It’s when the relationship is lukewarm is when it’s a problem [because] when it feels purely transactional that’s usually when people start looking elsewhere.”