Guest Blog: Should I raise my fees?

Should I Raise My Fees?

To which you should first ask yourself, “What Value do I Deliver?”

By Colleen Jordan Hallinan, Qii Consulting

In a recent survey of clients and friends on advisor fee schedules and pricing, it was not surprising to find advisors wondering if they should raise their fees and feeling reluctant to do so.  It’s hard to think of a single service where we haven’t seen our costs go up in the last couple of years, yet curiously, the most common response given for advisors’ reluctance to raise fees is a concern the clients will question the advisor’s value.

It’s not surprising because this “advisor esteem” issue is not just a recent phenomenon.  It’s embedded in the evolution of our profession.  In a Kitces’ article from 2017 on a related topic, he refers to a study done by Inside Information that “concerningly suggests that even as financial advisors increasingly shift more of their advisory fee value proposition to financial planning and wealth management services, advisors are still struggling to demonstrate why financial planning services should command a pricing premium in the marketplace.”

Full disclosure up front: whether you should raise your fees, and the facts and circumstances that you should consider in doing so, will be presented in a follow up article.  The foundational prerequisite to any discussion about fees is to establish concrete confidence in the value financial advisors deliver to clients so that the fee discussion becomes more academic.

For purposes of this and further discussion, “advisors” are CFP®s at independent RIAs, who are providing full financial planning services and investment management for an assets-under-advisement (AUA) percentage-based fee, with some also charging a fixed or hourly fee for planning.

What Value Does a Great Advisor Deliver?

To be a great advisor, you must help the client understand the two sides of the coin.  Side one is the quantitative pieces of their life: where they are now and where they want to be – that is, assets, cash flow and goals. On side two is the human who, for example, grew up with certain values, has certain expectations, believes in some specific things and disbelieves others, has trouble in some areas and loves spending time in others, and so on.  And these are just the tip of the iceberg.  For couples, side two is logarithmically more complex. For clients to succeed financially, they must understand that the two sides of the coin are inextricably connected and that their relationship with you requires delving into these complicated waters to integrate the two sides of the coin with you regularly in order to make their financial life work as they need it to.  This is no short order!

One of the best, simple descriptions of how the two sides of the coin connect and manifest is this succinct piece by Lou Harvey of Dalbar.  His points, briefly:

  • “Successful advisors provide useful knowledge and help clients avoid mistakes.
  • Be aware of each client’s knowledge level and state of mind.
  • Presenting your value to prospects and new clients is best done with examples tailored to the investor.”

Especially relevant are Harvey’s points on how the “client’s knowledge base is not a simple order, but a random assembly of facts and falsehoods derived from experience” and how “the detection of the change in the investor’s state of mind is the greatest challenge.”

A great advisor gives much care and attention to the ongoing discovery process to unwind this assembly of knowledge and to identify the state of mind at every turn.  We must always understand the big picture context that frames the client’s financial life. Not just assets, income and retirement goals, but “tell me more about this goal” and “when did this desire develop” and “what’s gotten in the way so far” and “how did your parents deal with this when you were a kid” and “ how well do your kids understand this” and “how aligned are the two of you” and “who else has given you input or advice on this” and, so on.

Your Confidence in Your Value = Your Client’s Success

Most experienced advisors have learned and practice all three of Harvey’s concepts, but clearly we often take for granted how our ability to do them well affects the client’s ability to do their job well in turn.   You know you have to dig deep because with any years of experience you’ve learned about the many obstacles that keep your clients from following through.  You’ve discovered that every client has a question beneath the question they ask you, that they have pre-conceived notions that get in the way of taking action, and that they have other people in their life who are not in the room with you that have influence over them.

The challenge for you is to put a premium on this learning, on this ability to discern all of the relevant components in a person’s life that affects their ability to make progress or take action.  Yes, all of the academic financial planning components are of enormous value, but without your ability to clear the path for the client, they may not move forward.

If only every doctor, lawyer, and other professional we hire in our life would approach their job this way, life would be so much easier for all of us.

Connect with us here so you don’t miss our next installment on considerations in evaluating your current fee schedule and whether you should make changes, including the most important conditions and components of your experience, firm and service.

 

 

 

Subscribe To Our newsletter

Privacy Notice

We recognize the importance of protecting our clients’ privacy. We have policies to maintain the confidentiality and security of your nonpublic personal information. The following is designed to help you understand what information we collect from you and how we use that information to serve your account.

Categories of Information We May Collect

In the normal course of business, we may collect the following types of information:

  • Information you provide in the subscription documents and other forms (including name, address, social security number, date of birth, income and other financial-related information); and
  • Data about your transactions with us (such as the types of investments you have made and your account status).

 
How We Use Your Information That We Collect

Any and all nonpublic personal information that we receive with respect to our clients who are natural persons is not shared with nonaffiliated third parties which are not service providers to us without prior notice to, and consent of, such clients, unless otherwise required by law. In the normal course of business, we may disclose the kinds of nonpublic personal information listed above to nonaffiliated third-party service providers involved in servicing and administering products and services on our behalf. Our service providers include, but are not limited to, our administrator, our auditors and our legal advisor. Additionally, we may disclose such nonpublic personal information as required by law (such as to respond to a subpoena) or to satisfy a request from a regulator and/or to prevent fraud. Without limiting the foregoing, we may disclose nonpublic personal information about you to governmental entities and others in connection with meeting our obligations to prevent money laundering including, without limitation, the disclosure that may be required by the Uniting and Strengthening America Act by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 and the regulations promulgated thereunder. In addition, if we choose to dispose of our clients’ nonpublic personal information that we are not legally bound to maintain, we will do so in a manner that reasonably protects such information from unauthorized access. The same privacy policy also applies to former clients who are natural persons.

Confidentiality and Security

We restrict access to nonpublic personal information about our clients to those employees and agents who need to know that information to provide products and services to our clients. We maintain physical, electronic and procedural safeguards to protect our clients’ nonpublic personal information. We respect and value that you have entrusted us with your private financial information, and we will work diligently to maintain that trust. We are committed to preserving that trust by respecting your privacy as provided herein.