Is it possible to introduce or increase trail with existing clients?

How do you convince an existing client to agree to an increase in trail commission or an introduction of it on pension or investments business written some years ago? How will you answer the pushback that you’ve already been paid?

I’m working on the premise that the overall charge is going to increase. Of course if you can receive a trail within the existing price structure (with the product provider taking a lower annual management charge), this conversation will be a lot easier!

 

When does trail commission / a fee make sense?

These remuneration bases make a huge amount of sense when real, ongoing value is provided by you. To my mind it’s as simple as that! I would argue that if the product provider is providing all of the value – why should you be paid a fee or trail commission? But if you are providing expertise and ongoing value to your clients, year in and year out, ongoing charges make sense. I’ve worked with a number of advisers over the last year that have each said that clients don’t understand when a fee is not charged! When clients receive value, they expect to pay for it…

So you first of all need to add real value to your clients. You then need to ensure that you demonstrate this value in a way that clients clearly recognise the value that they are getting. And then you need to remind them of the value that you are adding, again and again.

 

Trail commission or fee?

If you’re clear enough about what you do and the value that you are adding, whether it’s a fee or trail is somewhat irrelevant, these simply become a method of payment. So really it shouldn’t matter…

But of course that’s not the real world. I know many advisers prefer trail as it is a bit more “below the radar” and you don’t have to ask for a cheque each year for your fee. Of course that is an easier conversation and is perfectly fine, where you are adding that ongoing value.

It constantly comes back to adding value, being really clear about your proposition and communicating what you bring to the table in an engaging fashion. We only have to look across the water at the UK, where trail commission as we know it is no longer allowed. The adviser can be paid on an ongoing basis from a policy, but the charge has to clearly link back to the value the adviser is delivering. This is very challenging for advice businesses that have simply collected trail commission without providing and demonstrating any real value. How will they justify their charge to their clients? On the other hand, it poses no threat to those advice businesses that are clearly demonstrating value to clients and having transparent conversations about how much and how they are being paid. Trail commission and fees are simply methods of collection to these firms…

 

What about existing clients though?

So that’s all well and good, you demonstrate the value that you will provide in order to justify trail commission to new clients. But how do you move existing clients onto a trail basis? How do you answer the client who challenges you that you’ve already been paid?

First of all, you need to provide clients with more than they have received from you to date, or at a minimum make them aware of all that you do for them. You need to set out clearly all of the services that you will provide to your clients that you hadn’t discussed at the outset – services such as;

  • ongoing portfolio analysis and restructuring
  • rebalancing
  • future cashflow planning – this has been the big innovation and the firm foundation of high value financial planning services
  • access to your network of specialists (tax advisers, solicitors etc.)
  • your market insights
  • the money you are making / saving them every year

At the start of your relationship, you identified the right product for your client and set up their policy, and were paid commission to do so. Now you are going to add real value to these clients through the range of advice-based services that you offer – and for this you must be paid, either via a trail commission or a fee.

You need to demonstrate that your proposition will add ongoing value year after year, for the lifetime of your relationship. You need to communicate this very clearly in an engaging way, and use case studies and testimonials to demonstrate the results that you achieve for your clients.

Doing these, you’re giving yourself every chance to gain the agreement of your client to pay you each year. Because the value they get will significantly exceed the ongoing charge that they will pay.

 

How do you convince your existing clients of the value that you add, and convince them to pay for this by a trail commission or fee?

Can niche strategies work for financial advisers?

This is a question that occupies a lot of thinking time of many advisers today, as they contemplate their future client acquisition strategies. While we are seeing some advisers setting minimum hurdle sizes with new clients (either in assets under management or agreed fee levels), let’s be honest, many advisers are generalists, welcoming any prospective clients into their business. So it’s a valid question – is a niche strategy a viable business model for advisers?

I believe that if carried out in a very structured way, it can be a very viable strategy.

Let’s start with a definition of niche. One I came across described it as, ‘denoting or relating to products, services, or interests that appeal to a small, specialised section of the population.’ The scary part in reading this is the piece about the “small, specialised section”, as this leads people to think that their base will be too narrow to make it sustainable.

 

Niche strategies can make life easier!

I tell this from personal experience. When I decided to strike out on my own 6 years ago, this issue was the one that gave me the most headaches. Would I concentrate my proposition and ultimately my sales & marketing efforts only on financial advisers? Or would I offer my services to any client that I could get?

I went for the niche strategy, focusing my efforts solely on financial advice firms. My target audience was immediately narrowed to only hundreds of firms, rather than tens of thousands of potential customers. That was scary.

But what was far easier was connecting with this group. Rather than trying to appeal to everyone, and probably not connecting with anyone, I could focus all of my efforts on a specific group of people. This made it easier in developing my sales propositions, writing website content, producing newsletter and blog articles. I can communicate with a clear target in mind, and my messages as a result are a little more personal to my audience. On the other hand, when you are trying not to exclude anyone from your sales and marketing efforts, it’s very difficult to connect with people.

Yes, a narrow niche strategy is hard at times, and when business goes a little quiet the temptation is always there to broaden my marketing into other markets. But doing that will dilute my presence in the narrower (financial adviser) market. And just because you target a niche only, it doesn’t stop you working in other markets. I’m currently working with a fantastic construction company, who saw what I was doing with financial advisers and asked me to bring those skills to their industry. It’s a big challenge for me working in an industry that I’m not immersed in, but that challenge is making the work very interesting and enjoyable. But staying focused on my niche in my sales and marketing efforts will generate the lion’s share of my work, and is the right strategy for me.

 

What are viable niche strategies for financial advisers?

Financial advisers who have gone down the niche route successfully have tended to do so by focusing on one (or sometimes more) of the following,

  • Demographics: Focusing on specific age categories, gender, social grades (e.g. ABC1’s)
  • Employment sectors: Focusing on the public service specifically, sectors within the private sector, specific occupations.
  • Geography: Focusing on clients within a certain geographic area only
  • Product lines: Focusing on developing expertise and leadership positions within specific product areas or dealing only with clients who require full financial planning relationships.

 

What are the main steps in building a niche strategy?

If you decide to go down the niche route, first of all you need to do some research about your target niche. You need to understand the numbers of target clients (is the niche large enough to sustain you?), think through how you will access them and consider what opportunities are available to you to market to them effectively. You need to also think deeply about the problems that you will be able to help them to overcome, and how you will communicate and demonstrate your capabilities to that segment of the population in an engaging way. Because at the end of the day, you will live or die by whether your target customers recognise that they are dealing with a specialist in the particular niche or not.

 

Niche strategies are certainly not right for every financial advice business. However for some, they just might be the best way to fully leverage a unique strength or opportunity of your business.