How do you approach increasing your fees?

One of the areas of greatest challenge for financial planners in Ireland today is increasing the level of your fees / trail commission from the levels that you are currently charging. But time marches along, and often when you actually turn to really examining the issue, many advisers find that their charges haven’t increased at all in the last 10 years! There are very few other professions where this would be the case.

The comments that I hear are,

“It’s all well and good that UK & US advisers charge 1%, as their asset management fees are so low” 

and “You can’t charge more than 0.25% / 0.5% p.a. (or fees of €1,500 / €2,000 p.a.) and justify it”.

However, there are growing numbers of Irish advisers that do charge more and their clients happily pay more. So how do they do it?

 

Their proposition stacks up

Please note, this article is not about the merit of trail v fees, that’s a whole other conversation! For the purpose of this article, I’m simply going to call them both fees.

Advisers that attract higher levels of fees tend to have superior propositions. They have put a lot of time and energy into really thinking through their client proposition and the value that clients experience from working with their firm. There’s no grey in the proposition – they are crystal clear about all of the value areas.

When this work is done properly, very quickly all of the new areas of value that you provide become apparent, and you see where your proposition has grown and how you provide more value today than you did when your fees were set. All of this added value at no extra cost (currently)…

Once you start to clearly identify these areas of additional value, you’ve taken the first step to increasing your fees.

 

They actively communicate their value

This is often the area of biggest challenge, particularly with existing clients. Actually having that conversation with a client about the value being added. It’s always easier just to talk to the client about their financial plan, their cashflows and their policies – it all feels a bit “American” to have a chat about the value being added!

But if you don’t have this conversation, all you can do is cross your fingers and hope your clients see the value they are getting…

This conversation has to be highly structured (by you) and very well practiced. You need to be able to clearly demonstrate that you’re not just “winging it”, hoping to increase your fees on a case by case basis. Instead by clearly articulating the services that you provide, the value derived from them and the cost of them, clients can see what they are getting for their fees.

From experience, this tends to work best when advisers offer multiple (2 or 3 usually) service packages. The higher value packages show the increased services being offered for the higher fee levels. Also if a client is not willing to pay a higher fee level, they clearly see the services that they won’t be getting.

 

They justify their fees

The communication is critical, but a slick sales pitch is not enough! Advisers who charge higher fees clearly justify those higher fees. This is achieved through providing a range of evidence,

 

  1. A statement of financial improvement is where you demonstrate to your client the actual € value of your advice – this might be in a net worth statement, portfolio increase, tax saved, costs saved or other such metrics
  2. A client calendar of all the interactions that you carried out with / for them over the last 6 or 12 months such as the meetings you had, the phone conversations, the newsletters you sent them and the events you invited them to etc. Not forgetting of course the updates to their plan and cashflows, the portfolio rebalancing and ad-hoc service requests.
  3. Timesheets are provided by some advisers to demonstrate the level of work carried out on the client’s behalf and providing a justification of fees in the process.

 

When you start pulling all of these strands together, it can seem like a lot of work to be undertaking. However the prize is huge! You will quickly realise the value you’re adding and this will give you increased confidence to have that conversation about higher fees with your clients. They see the fantastic value they are getting from working with you, while you earn more in the process. A win-win situation!

 

How will you grow your business?

What’s the question I’m most frequently asked by both prospective and existing clients? It is “How can you help us grow our business”. Of course, there’s no one simple solution or silver bullet for this one, instead there are a number of different strategies and tactics available to you…

Before we help advice firms decide and implement the right approach for them, we carry out a very detailed analysis of your business. It’s very important that you choose your preferred strategy with your eyes wide open as to its suitability for your business in terms of a number of factors such as,

  • The new client opportunities open to you
  • Your appetite and desire to network, both online and offline
  • Your appetite to potentially develop new qualifications, services and new areas of expertise
  • Your appetite and expertise to undertake different marketing activities
  • The budget and resources available to you

 

You need to start by understanding where your strengths are and how you can best utilise them. While of course the grey quadrant looks the most attractive, it is not going to be the right strategy for many firms! So, it is worth taking a look at each of the quadrants in turn.

 

Retain

This is of course the most passive of all of the strategies, and it could be argued that it is not really a growth strategy. Maybe it’s a “prevention of loss” strategy? But it is a very important minimum approach for every firm. This entails meeting the needs of your existing clients on an ongoing basis, providing them with the advice, support and service that you promised to them at the outset of your relationship with them. This includes providing the level of service that they can reasonably expect from you, and that allows you to fully justify the income you earned already from them, and the ongoing income that you continue to earn.

While this may appear too passive to some, this is a strategy that may make sense for advisers coming towards the end of their career. Your business may have delivered the lifestyle that you wanted over the years, with the final task being to retain your book of clients with a view to selling it in the not too distant future.

 

Grow your client book

This is the more traditional approach, coming from an era when an adviser’s income was generated largely by initial commission. While of course new clients are still very important to every business, they are not the single driver of success that they used to be. If we look back 20 or 30 years in the financial advice sector, ongoing service to clients played a much lesser role and resulted in very low levels of ongoing income. As a result, businesses survived by a constant stream of new clients. And this in turn resulted in advice firms having lots of “transaction based” client relationships, as opposed to the deeper client relationships that we see today.

Of course there are many firms continuing to pursue a client acquisition strategy today, constantly seeking to bring new clients on-board and looking to grow their overall client numbers. For the networkers / rainmakers among you, this may be the strategy for you. It’s hard, because you need to be constantly “out there”. But if your skill set is in this area (and not necessarily in the areas as set out below) and you have the right supports around you, this may be your preferred approach.

One of the downsides of this approach is with less of a focus on ongoing services, you cannot command the same levels of ongoing remuneration and as a result this will dampen future valuations of your business. This also requires a higher marketing spend, as you attend events, entertain prospects, advertise and carry out sponsorships to raise awareness of your brand and undertake other client acquisition strategies.

 

Increase Income per Client

This is the area today where I spend most of my time with my adviser clients. Under our “Getting to 1%” programme, we pose the valid question – Why and how do advisers in other developed markets (and some advisers in Ireland) charge an ongoing fee / trail commission of 1% of assets, while in Ireland it’s typically 0.25% to 0.5% p.a.?

The answer lies in having a client proposition that justifies higher income levels and then being able to communicate that effectively. This takes significant effort, thought and work. It may take higher levels of qualifications, new skills and broadening out the services that you provide. We see this in financial advice firms today evolving into financial planning firms. These firms are developing much deeper relationships with clients through providing lifestyle financial planning, with future cashflow planning being a core element of this. This takes investment in your business, time and effort to develop the required technical skills and capabilities. And then you have to be able to communicate it all effectively across all platforms. Some advisers who are in this quadrant are actually seeking to reduce the number of clients overall. This is typically where they are trying to shed transactional clients who are not open to deeper relationships.

The payback for advisers who successfully carry out this strategy is immense. The same (or lower) number of clients, but now generating multiples of the level of income that you were previously getting.

 

Grow Clients and Deepen Services

Is this nirvana? From my experience this happens as a result of successfully occupying the green quadrant – increasing income per client. Where advisers offer an excellent client proposition and are communicating it very effectively, referrals just happen because your clients love what you do and talk about it. So some of these firms in the green quadrant end up in the grey, because new “perfect” clients from your target markets come looking for your services. Isn’t this the best place to be?

Are you struggling to make the breakthrough with accountants?

Many financial planning firms today are seeking to build long-term, valuable relationships with SME business owners. A problem you may face is accessing these people, and one route that offers great potential when carried out successfully is by building links with accountants.

However building these relationships is often a tough nut to crack! So here are a few thoughts on how you can build profitable accountant relationships, with accountants referring clients to you regularly.

 

Treat accountants themselves as a specific target market

You may have done all of the work developing your client value proposition (CVP), but this is aimed at your end clients – there’s no point simply sending this on to accountants in the hope that they will see the value in it. You now need to be able to communicate the value experienced by accountants in dealing with you. Your CVP starts with understanding your clients and in a similar vein, your accountant proposition starts with understanding accountants; their challenges, the partnerships that they value, where you can provide services that they will truly value etc. If you can help them to solve the problems that they face every day, well then they will place enormous value on your services! So first of all, really understand their business, identify the areas within it where you can add value, and then show them how the way that you propose working with their clients will seriously enhance their own client relationships.

 

This is not a once-off exercise

You then need to get in front of the accountancy partners time and time again to remind them of the value that you can add, and to ensure you get regular client referrals. There are many ways you can do this; here are a few examples,

  • Add the partners to your own communication programme: Connect with the partners on LinkedIn and also get their permission to be added to your newsletter subscriber list. Let them see the expertise and thought leadership that you have to offer.
  • Develop bespoke presentations: These are for the initial meeting with the partners throughout the practice and should focus very much on the role of the accountant and how you can assist them in their own role. Personalise each presentation to the role of the particular partner’s area of specialism – for example the presentation to the tax partner should focus on pension reliefs, tax efficient protection products and other tax angles that you can bring to the table. This shows knowledge, understanding and willingness to engage in their areas of challenge with their clients.
  • Case Studies: Prepare a number of case studies of innovative solutions that you’ve implemented and know are relevant to challenges that are typically faced by the accountant. Don’t leave them guessing as to how you can help, join the dots for them!
  • Briefings for partners: Keep the accountants briefed on issues within the life and pensions industry that they need to be aware of, but may not be that knowledgeable. This can be through email contacts, lunchtime meetings or other such channels.

 

Develop joint marketing activities

And then you need to also promote the accountancy firm and help their bottom line! First of all, refer clients to them whenever possible. If you give them new clients, they are certainly going to try harder to reciprocate. Then offer the accountant the opportunity to include guest posts in your newsletter. This gives the accountant welcome exposure to your clients. You can then look at hosting joint events to which you both bring clients, take a speaking slot to impress the guests, all of this with a view to both you and the accountant meeting the other’s clients and building new relationships.

 

Prove your value with clients

Of course the biggest barrier to accountants referring clients to you is fear. Fear that you will somehow mess up and as a result cause difficulties for the accountant with their client. So when they do take the leap and finally refer a client to you, it’s imperative that you do a good job (as you do!) and then make sure the accountant is aware of it. How do you do this? You might seek a testimonial from the client, which you then share with the accountant. Alternatively you can email the client a few weeks after the end of your work with a short client satisfaction survey – again you will share the results with the accountant.

 

These are just a few thoughts on building profitable relationships with accountants. Build their trust, remove their fears, align yourself to their proposition and demonstrate your value time and time again. And then you will be well on the way to breaking the back of that search for new clients!

“I know someone who’ll charge me less”

You’ve all been there… the fight over price. You know you’re right for the client, you can add a lot of value, but you can see there is an immediate issue niggling away. You probe the client and they say something along the lines of, “Let’s cut to the chase, what do you charge as I’m talking to another adviser who will manage my assets for 0.25% p.a.”?

Assuming you charge 0.5%, 0.75% or even 1% p.a., what do you do?

 

1. Now’s not the time for negotiation

The fatal mistake is to start negotiating your price now. After all, the client has absolutely no idea what they are paying for at this stage, and the value that they will get from working with you. Obviously you can’t ignore the question, but the answer needs to be along the lines of, “I can hear that our price is a key consideration for you. Let me set out what we do first, as there are a range of different options available to you”.

Don’t let yourself get dragged into a price war at this stage!

 

2. Go through your normal initial meeting process

This is where you take control of the meeting again. Rewind the meeting to understanding the client’s objectives (through careful, open questioning) and then presenting how and what you do. This is where you set out your advice process, your annual review meeting process and the ongoing service packages that you offer. Assuming you offer differentiated service levels for different segments of clients, your client will now see what you have to offer at different price points. If the client wants rock bottom pricing, well then he / she will see that they won’t be getting a premium service at that price level.

In order for your competitor to offer such a low price, they are probably not promising anything! So the other advantage of taking the client through your approach is that it will demonstrate the significant advantage of working with you as opposed to your competitor.

 

3. Be firm and brave!

Stand by your pricing as a premium advice provider. Acknowledge that you are more expensive; your client will actually respect you for this. Yes you can have lower cost packages, but within these the client should be left in no doubt about what is included and more importantly what is not.

What if the client looks for your premium service package for a lower cost? Well then you’ve a choice to make! Yes, you can be flexible, but I suggest only if there is a good reason… maybe the client is an important access point to an attractive target market, maybe you see broader opportunities with them. Don’t just agree without a reason, or otherwise you will simply start dropping your price at the first hint of a push-back from anyone. Sometimes it’s better to walk away, rather than agreeing to a price that doesn’t make economical sense to you.

 

4. Make sure you can deliver… and prove it

If you want to charge higher prices than your competitor, you have to able to deliver more. So it is very important that you can actually deliver what you promise. The last place you want to end up in is the dreaded “over-promising and under-delivering” experience for clients. This is the certain road to losing clients.

Of course your prospective client won’t have experienced your service at this stage of your relationship. So this is where you need to be able to call upon the experiences of other satisfied clients to add validity to your promises. This is where those client testimonials, LinkedIn recommendations and case studies of previous work come to the fore. They paint the clear picture of what your prospective client can expect.
5. Add value beyond the sale

Finally look to add value beyond the sale. Are there services that you can offer to your client that sit outside of your service packages? Maybe you can provide a willing 2nd opinion on any broader issues they might have in relation to financial planning? Maybe you can give them access to a broad network of business professionals that can help them in running their business? Or maybe you can refer some of your contacts to them as potential clients?

 

At the end of the day, you’ve a choice to make. Is your competitive advantage based on offering your services at the lowest price, which ultimately will be a race to the bottom? Or can you offer superior value and build your business around delivering this value, at a higher price? The choice is yours!

 

What is a Client Value Proposition?

OK, let’s start by stating that there’s no science behind the answer to this question, there’s no right or wrong answer. What I’m going to set out is my view of what an effective Client Value Proposition is and what it should contain. So let’s start at the beginning.

What is a Client Value Proposition (CVP)?

The best answer I’ve seen to this question is a definition that I found online which states that “A client value proposition is a clear, concise and compelling articulation of how the factors that are important to the client are satisfied by the company.” The key words in this are “important to the client” because this is where the CVP begins and ends. If you don’t place the client at the very core of your thinking, unfortunately you’re going to miss the mark. Yes, what you do, and in particular what you do well are important. But unless these activities are going to positively impact the client experience, they don’t belong in your CVP.

I’m also a strong believer that a CVP is not a glossy document. Instead I see it strictly as an internal document and not for client eyes at all. If developed fully and successfully however, it is the single document that will guide everything that you do with your clients – how you speak to them, how you write to them, the content you write for your client presentation, website, brochure and newsletters and the services that you provide to clients. It can certainly be classed as one of the most, if not the most important documents that you develop for your business.

This document then becomes the guidebook for you, your staff and your future staff. If a team member cannot or is not willing to deliver this proposition to clients, you need to seriously consider their place on your team…

What should your Client Value Proposition contain?

It certainly is not a wishy-washy statement of how good a financial planner you are. Remember it’s all about the value as experienced by the client. I think an effective CVP contains the following – if you can articulate all of these points, you will have a very powerful document to guide you.

Why you’re a financial adviser / planner: This is really important as it articulates your values and whether your set of values are important to a client or not. If a client recognises that they share the same values as you, this is a really compelling magnet to pull them in your direction.
Who your target markets are: These are important, as your clients need to know whether you have the required expertise and experience to meet their specific needs,
What makes you different: This is where you identify the points that you believe make you different to other financial advisers & planners, and how these points of difference translate into an enhanced experience for your clients.
The outcomes and benefits that a client will experience: Clients want to understand what the end results will look like when dealing with your business. It’s important to think about both the emotional benefits that a client will experience from having you as their financial planner, along with the rational / tangible outcomes they will experience from being a client of yours.
What you don’t do: Some clients may come to you with pre-conceived and unrealistic or indeed incorrect expectations of what you do. As far as you can, it’s very useful to set out for clients what you don’t do in order to manage those expectations.
How you work with clients: This sets out how you actually deliver your advice to clients, what the actual steps that you go through with clients, the reason for each step and how it will positively impact your clients. This is a really important piece as this is the nub of how you work with clients and allows you to demonstrate what they can expect and how it will help them to achieve their desired outcomes. Get this piece right and it offers you a further opportunity to really stand apart from your competitors.
The ongoing services that clients can expect: The previous point will most likely focus on the initial engagements with people as they become a client of your business. This section then sets out what a client can expect from you year after year, the importance of your ongoing service proposition and how it will help them on their financial journey.
Your review meeting process: As this is the most important ongoing interaction you’ll have with your clients, you need to spend time thinking through how you add value to clients at these important junctures each year. Mapping out these important meetings is a crucial step.
What it all costs: You can argue whether this belongs in your CVP or not, but from experience this piece becomes far more straightforward after all of the above is done. If the CVP is strong enough, clients will see the value and will then want and expect clarity of what it’s going to cost them. You can also now communicate your pricing transparently and with confidence.

Developing your CVP is not easy. It requires time out of the business, deep internal reflection, time and concentration. However if done well, it will be the single most valuable piece of work you do in developing long-term relationships with your clients.

Don’t be ashamed of selling!

I was with an adviser some time ago who ticked me off on a couple of occasions when I mentioned the word selling. He contended that he is an adviser and not a salesman. I say that you need to be both…

 

There’s nothing wrong with selling!

For some people, selling is a dirty word. Particularly so when you are dealing with financial services. That’s understandable I believe when it comes to mis-selling, however this is an experience being suffered thankfully by fewer and fewer clients today. Financial advisers have really raised their game, industry standards have increased, and compliance oversight has increased too – all of these factors resulting in fewer incidents of mis-selling. Yes, there have been a few high profile cases unfortunately in recent years that again undermine trust, but these are not representative of the market in the main.

In fact these cases increase the need for selling! Not of financial products though, instead there’s a need to get out and sell the value of doing business with you!

 

Selling is exchanging

The Wikipedia definition of selling is; “Selling is offering to exchange an item of value for a different item”. A key part of your job is to convince your clients to exchange your item (advice, guidance, expertise) for their item (commission, fee). So selling is not passé. The financial advisory business model still needs selling.

The old days of “the insurance man” out selling products are thankfully long gone. This was where the seller was very transactional focused, having access to a very narrow range of (poor) products and their role was to convince people to buy these products, whether they really needed / wanted them or not.

The difference today of course is that the process starts and ends with the client. The transaction (if needed at all) is only a means to an end, a mechanism which helps clients to meet their own specific financial objectives. The value that the client gains is the advice, leading to better financial and life outcomes for them, rather than the product itself. Of course nothing stays the same as well, so advisers also need to sell the benefits of ongoing monitoring to ensure their plans stay on track to achieve their objectives.

 

Selling is necessary

Independent financial advisers provide a really valuable service to their clients. However prospective clients who haven’t experienced your service and seen the value being gained, may still be living in a world of mistrust of all financial advisers. So you’ve got to convince them otherwise and sell them the value that they will derive from having an expert on their side of the table, guiding them through the complexities of the world of personal financial planning.

To do this, you need to have developed a very robust proposition for your clients and then be able to communicate this in a very engaging way. If you can’t do this, they won’t see the value that they are getting and of course there is no way that they are going to part with their hard earned cash to buy your services.

 

Don’t be ashamed of selling, it’s a very noble pursuit when carried out with the right intentions! You can be very proud of the product (advice) that you provide and of the value that clients get from exchanging value with you. So get out and shout it from the rooftops!