Make Discussing Fees With Your Clients Easier
March 29, 2017 By Signator Investors
“Price is what you pay. Value is what you get” – Warren Buffett
One of the most basic tenants in a capitalist society is the dynamic between price and value. What is Person-A willing to pay Person-B for either a product or a service? For a car, you’ll pay a fair market price based on how much you value the quality, comfort, reliability, performance and style. For a haircut, you’ll pay a fair market price on how much value you put on the results and effort that went into the process.
Always keep in mind that value is often very subjective and therefore can impact the “fair market price” considerably. For example, I value tickets to a New England Patriots game much more than my wife does. So someone looking to sell Patriots tickets would be much better served selling their tickets to me (a person who clearly values the greatness of a football dynasty) than my wife, who would would probably prefer spending that money on something foolish like fixing our leaky roof.
Obviously I’m joking about the tickets versus a leaky roof, but it does illustrate the polar opposite views two people can have on the exact same product or service. Price, as in beauty, is truly in the eye of the beholder. If you want to receive fair price for something, you better make sure the buyer sees the value in what you are providing.
Why should you care? As an advisor, you have to discuss your fees with your clients and you have to be able to articulate the value you bring. A 2013 John Hancock Investments survey found that nearly 70% of advisors have lowered their fees at least once with their clients. The survey uncovered that only 1/3 (32%) of the time when fees were reduced, was it due to a competitive situation with another advisor. Yet more than ½ (53%) the time when fees were reduced it was because the client questioned the value of the services they received. So how do you make sure your clients not only see the value you bring, but they appreciate the value you bring? There are many ways to approach this, but here are three concepts to incorporate into your thought process regarding fees:
1. Recognize & Embrace Your Value
- You add significant value to your clients. You provide specialized expertise, guidance and access to key resources to achieve their goals. This is NOT something they can do on their own.
2. Don’t Fear Your Fees:
- Understand what your fees consist of and the costs associated with the services.
- Understand who your competitors are, what services they provide and what they charge.
3. Communicate & Recommunicate Your Value:
- Discuss your fees early with your clients. The longer you wait, the more uncomfortable it gets for you and your clients.
- Don’t assume your clients know everything you do for them, so tell them!
- Don’t assume your clients remember everything you do for them, so remind them.
- Gather feedback on how satisfied your clients are. Make sure you are not just meeting, but rather exceeding their expectations.
Finally, remember that fees are only an issue when there appears to be an absence in value. If you provide and articulate your value, the fee discussion will be easy.
Peter Wright is a Practice Management Consultant with Signator Investors, Inc. Peter has over 18 years of experience as a Product Wholesaler and Practice Management Consultant.