Love of financial planning prompts advisor to pursue fee-only modelBy Susan Yellin | January 29 2018 07:00AM
There aren’t many young teenagers conversant in the complex language of financial services. But Marlene C. Buxton, now a BA, CFP, CLU clearly recalls one of the first conversations she had with a financial advisor/neighbour.
“I remember vividly learning about annuities when I was just 13-years-old,” Buxton says in an interview at her First Canadian Place office in downtown Toronto. “I learned about prescribed versus non-prescribed, tax implications, why it’s important to index them and why it’s important for long-term planning.”
Back then, Buxton lived in Belleville, Ontario, going to school by day and then by night, babysitting for neighbour/teacher and now long-time mentor, Lise Allin, who had recently acquired her own Money Concepts franchise. The more frequently Buxton sat for Allin’s three children, the more steeped the teenager became in the art of financial planning.
So it came as no surprise to anyone when Buxton announced her career would be in financial services. But now, not just as a “regular” financial planner: not only did she want her own firm, she also wanted to be both fee only and advice only.
The realization came after a few years of working in the industry. Buxton had started at an insurance company, but soon found there was too much pressure to sell insurance, especially if a client really didn’t need it.
As well, she didn’t like the idea of focusing on only the one subject – insurance – when she would rather be true to her calling of the more holistic subject of retirement income and estate planning. “There is an inherent bias if you are selling products and doing planning at the same time,” says Buxton. “The other side to it is the very reason why I wanted to go into the fee-only model, which is that when you are stretched so thin trying to do everything, you can’t do one thing really, really well. So I couldn’t go as in-depth in the planning as I would have wanted because I was doing so many other things.”
Given that situation, Buxton believed it would be increasingly difficult for financial planners like herself to continue to bring in the same earnings in the years ahead.
She was mulling over these changes as she built up Buxton Financial in Belleville. After two children (now 17 and 20) and a divorce, she headed to nearby Whitby before moving on to Toronto to set up shop.
In early 2017, she made the pivotal decision to sell her block of business to other advisors and work strictly in the fee-only/advice-only specialty.
“I can do the transaction side – which is the products – but it’s not something that I love doing,” she says. “And the way things are changing – you have to increase the amount of clients you are dealing with and basically do more on the transaction side. I was already stretched so thin trying to do everything that it would make it even more difficult to put time in on the planning side. Since I do love the planning, I went that way.”
Her decision to move into her new model came amid major changes in the financial services business. Not only are regulators seriously discussing doing away with embedded commissions, there has also been downward pressure on fees, especially since July when regulators brought in CRM2 outlining more information to clients about fees in dollar terms, along with performance data.
Buxton offers three packages to her ideal clients – those who are nearing or are in retirement: a standard package, a complex one and a customized version.
At the first meeting, all clients discuss how they want to live and outline their concerns – the biggest being whether they will outlive their money. Out of that she determines the structure of their finances. Most people have a relatively simple plan and indeed there are those who only need help with specific topics such as financial management, or how to fix cash flow. For this group she offers sessions rather than a full plan.
But there are those who have more complex situations, such as those dealing with corporations or trusts. Generally, the customized plans are for business owners who not only want a plan but also the freedom to call her throughout the year and at tax time.
Buxton acknowledges clients must see the value in the fee-only/advice-only model. Most are accustomed to an embedded fee model where they never really saw how much they were paying to an advisor, except if they read their recent performance and cost data. For those who want to know how they are going to benefit, she may cite direct savings through a strategy that helps lower their taxes, or how to avoid a clawback on their Old Age Security benefits. The biggest value, she says, is that clients know the advice is unbiased.
To gain business, her original premise had been to network and get referrals from current clients. Deep down though, she thought this would be too slow a way to start and build her business. But then, to her surprise, financial advisors who worked mostly on the product side, took notice of her planning expertise and came knocking on her door. “I have a wide network of friends and people in the industry. And then I realized that they did not see me as competition and would actually help me with what I do.”
As well, advisors who don’t want their own businesses but want flexibility and a good rate of pay may decide to do fee-only/advice only planning under the Buxton Financial banner on a full-time basis, she suggests. Other advisors may need some help working on retirement plans for their clients or need advice on running the retirement software side of the business, in which case she acts as their consultant and can provide a plan for the advisor to present to their client. In addition, many advisors don’t offer insurance products and she can step in and suggest a strategy in that area.
Clients can of course meet with Buxton immediately after being referred, but there are others who may feel somewhat pressured to see a new and different planner. So Buxton holds several events a year at a private members’ club in downtown Toronto. It allows financial advisors to check her out as she gives a talk directed to potential clients in a low-pressure environment.
As for competition, Buxton says many advisors are working with younger people, focusing on their long-term strategies, not on retirement income planning. “They’re much more complex calculations and strategies in that market. If advisors are looking after products as well as doing some planning, the calculations and strategies may be too in depth for them to make a go of doing this.”