Do Clients Expect a Set Return, or To Beat the Market?

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Jul 15, 2010 2:02 am

I will be starting as an RIA using the 1% of AUM as a fee structure.  I'm just curious how others justify this fee  - what some of the sales piches, rationales are.  I personally don't believe that any person can beat the market or guarantee a certain performance so I wouldn't feel comfortable claiming this.  I think I would rather say that I can't guarantee any performance, that the value more comes from having someone personally oversee the portfolio on a regular basis and devise an optimal asset allocation strategy based on one's individual and personal needs and goals, and market dynamics.  I would almost rather stay away from conversations about performance or returns but do others feel like this is realistic?  Do clients ask for the latter?  Thanks.

Jul 15, 2010 4:50 pm

Do Clients Expect a Set Return, or To Beat the Market?

They expect both plus about 100 other things for low costs, no costs and the risk of CDs.

Good luck.

Jul 15, 2010 5:57 pm

You're framing the problem wrong.  The problem for individual investors is that they don't even match the market.  They buy high, sell low and generally have terrible market timing.  That there is your value proposition.  Or it should be.

Jul 15, 2010 10:32 pm

Clients expect for us to beat a reasonable benchmark matching their risk tolerance and time frame by enough to cover our fees etc. That is a reasonable expectation and it will be your job to control their emotions during the times you underperform or market tanks.