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When we talk about the problems associated with an advisor’s fees, it isn’t that they are too high, too low, or inappropriately structured. Rather it is that advisors typically fail to communicate effectively with their prospects what those fees are actually doing for the client. In other words, what is the value of the service being paid for?
Essentially, the fee discussion isn’t about one of the actual fee structures in place, but about the advisor’s ability to communicate the value associated with the fees. If you’ve ever been asked a question like one of these below, chances are your value messaging isn’t clear:
‘What am I paying these fees for?’
‘How do you compare your services to [XYZ advisor]?’
Here’s how to effectively communicate your value to clarify your fees and avoid the discussions prompted by the questions above. Don’t worry—this does not require you to change the model in which you charge fees, only the way in which you communicate the value of them.
1. Make a Detailed List of What You Do for Clients
You know how you help clients every day. Your staff knows, and your clients know, too! But the problem is that prospective clients do not. Plus, different advisors offer different services. Of course, this is great news for everyone because it means a consumer can find exactly what they need that will fit their budget, their circumstances, and their personality. But, narrowing it down can be a little exhausting; you can expedite the process and alleviate some of their stress by providing a clear picture of what you bring to the table upfront.
To begin this process, list out all of the ways you help clients on a daily basis. This should include everything from the basics like tax burden management, 529 plans, cash flow assessments, and retirement income generation to more personal concerns like Medicare plan reviews, risk assessment stress tests, or even real estate purchase reviews if this is something you offer. This exercise will help you segment your values in the next step.
2. Segment the Above List into Three Main Categories
Again, remember that the goal here is to help your prospects understand what it is they are getting for their fees—and be able to walk away from your call or meeting and recall with clarity what that is!
In order to aid in the understanding and retention of your value, you need to “chunk” or segment all your value into three main categories. This is how it will best be digested and retained by the prospect. It also helps to tie fees to specific areas of service.
One advisor, for example, states, “There are 3 things that we do: Complete Financial Planning, our Investment Process, and Family Office Services.” Of course, there may be a million tiny little things you do under each category, but those are most likely less of the “what” and more of the “how” (which will be better suited for more detailed conversations down the road).
Here, this advisor discusses each of the three categories in detail and then associates a sample fee based on the value for each of the three categories. In closing the conversation, he presents one overall average fee that is less than the 3 individual segments combined. His clients understand how he has arranged his fees and he does not have a fee issue going forward. His clients know his value and prospects understand what they would be getting for their fees in a wealth management relationship with him.
3. Solidify a Delivery Plan for Prospects and Your Marketing Messaging
Once you have segmented your value, you must practice delivering it with value and precision. This includes working it into your overall marketing messaging, which should remain cohesive across all modes of communication from your conversations to your website and all other forms of outreach. The three pillars you identify should be very clear to anyone who comes across your firm.
Change the Discussion, Not the Fees
If you find that you are constantly being asked to justify your fees, you may start to wonder if they’re too high and consider changing them. However, more often than not, the problem isn’t with the fee model itself, but in the way the value of those fees is communicated. Changing the way you discuss what you do, so that every client can easily identify the value of your relationship, results in far more closings in much less time. Plus, you get the added bonus of not having to justify your fees with each prospect—which you know pale in comparison to the value you actually do offer.
Related: Make Some Noise! It’s Time to Become a Fan-Worthy Advisor