Can you stand over your charges?

Lots of the conversations that we’re having with financial advisers are in relation to the ongoing value you are providing, and the cost being charged for delivery of that value. However if we are to be completely truthful, it doesn’t always start out from that point….


Quite a number of the conversations start out from the point of, “I’m charging 25bps / 50bps and I’m not comfortable that I can really stand over it and justify it if pushed”. Advisers are looking over the horizon and seeing potentially greater levels of scrutiny from clients and the Central Bank in relation to trail commission. You recognise that you must be able to comfortably justify your trail commission if you want to grow the levels of it, or even to maintain it. This unfortunately often results in advisers remaining in the supposed easier place of a low trail commission rate, in order to avoid any pushback around price.


After all, trail commission has been extremely good to many advisers, who have seen recurring income rise substantially for relatively little effort in some cases, while also building long-term value in your business. Investment markets have delivered excellent returns over the last decade, and your trail commission has increased accordingly. You don’t want to lose this growth, hence the pressure to justify it. However you’re now looking at investment markets today and recognising the significant fall in your income that will happen, should there be a biggish correction in the market. Also if your income is very tied to the investment of your client’s assets, any under-performance against benchmarks also raises a question over the validity of your fees.  These issues arise when the only determinant of your trail income is asset levels. The problem is that when you’re only thinking about asset values and your costs, you’re starting from the wrong place.


The only place that this whole conversation can start is with the value that you are providing. Otherwise, it is a serious case of the cart before the horse… When you work out in detail the different levels of value that you are providing to your different clients, it is only then that you can start to price your services in a structured and robust way. Your income is now tied to the services that you are providing, giving you certainty and control over your income stream. Many advisers who do this properly continue to collect their income via trail commission, however now they have minimum charges for each of their service levels. These minimums protect them against falls in the market, and indeed enable them to meet the demands of clients for high service levels where their asset levels alone do not justify them.


When you get crystal clear about your service levels and can easily articulate and communicate the value that you are adding, that nervousness around your trail levels subside. Instead it goes the other way – it gives you the confidence to maintain and increase your trail levels, when you know that your services warrant these higher levels.


Now you can be firm and brave in relation to pricing. When you are clear about your services on offer, you can stand over your pricing as a premium advice provider to relevant clients. With clients who demand premium service levels from you, you can demonstrate the breadth and value of your services, and then justify that you are more expensive. Yes you can have lower cost packages, but within these packages the clients should be left in no doubt about what is included and more importantly what is not.


Clarity around your value gives you a strong position when negotiating your price. Without it, you’re forced to keep watching your competitors and make sure you are undercutting them. A race to the bottom… However 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.


Spend your time now looking at the value that you add. Do this piece well, and the cost side will fall easily into place, giving you confidence to stand over your charges all day long.

Do you do business with family?

This subject came from a conversation I had recently with a young adviser – well at least he’s a good few years younger than me! As we were discussing target markets and where his clients come from, we had a very engaging conversation about doing business with family.

This adviser has actively steered clear of doing business with his family. His thinking was that it’s just not a good idea to mix business with family and he likes to keep the two parts of his life separate. While I understand this viewpoint, I don’t agree with it.

I completely accept that financial planning is a very personal exercise and that some of your family members may not want to share their intimate details with you. Of course that’s their right and if that’s the case, you should do your utmost to point them in the direction of another planner who you are confident will look after them well. In fact I’d go further and suggest that before you engage at all with a family member, make it crystal clear that you will be delving into the intimate details of their financial life and also potentially their health. Don’t spring this on them later in the process, as this will cause awkwardness and potentially worse, they may withhold some information from you. This is a potential disaster for everyone.

But don’t close your door to them just because they are family.  Here are some reasons why I believe your door should be open  and the choice should be theirs as to whether they walk through it or not.


Your proposition will benefit them

If your proposition is very good and positioned openly and honestly with family members, why would you not make it available to them? Be crystal clear about what you influence and control (the plan and their behaviours) and what you don’t (the markets). Make sure they know fully what to expect in advance – avoid surprises. But don’t refuse them access to your valuable proposition.


They trust you

So much of financial planning comes down to trust, having a deep belief that the adviser is in their corner and has their best interests at heart. This is sometimes a lengthy process, building up this position of trust. Hopefully with your family members, you have it from the outset – they just know that you will do everything in your power to see them right.


You have each other’s backs

We all want the best outcomes for our family and will go the extra mile. They will probably want to do business with you and help you grow your business. They know you’ll earn money from the work, but will usually be happier that this income is going to you than to some unconnected third party. Likewise, you’ll pull out all the stops for family members, you are very likely to go the extra mile to achieve the best outcomes for them. On top of this, you may transact business on “mates rates”, providing value for them too. The chances are everyone will be a winner…


You can cut to the chase

An advantage that you hold over all other financial planners is that you begin the process with lots of intimate knowledge of their situation. Of course you need to fully validate your information through careful questioning of objectives and factfinding, but you’re not starting with a blank page.

Indeed you have the added advantage of understanding any unique dynamics at play and also being able to cut to the chase… You know if pictures are being painted in strange or maybe over-optimistic hues and can gently call out your family member when this happens, as opposed to blindly accepting it as another adviser inadvertently will. With your prior knowledge, you can help to shape the most accurate picture, which in turn will help to ensure the best possible plan is developed and the best outcomes achieved.


A great source of referrals

Excellent financial planning transforms lives. Do this for your family members and they will be forever grateful, as you help them improve the quality of their lives. They’ll also tell other people and will be a great source of other new clients. Your family are happy to help you grow your business, their friends who become your clients experience the benefits of your excellent proposition and you grow your business. Winners all around.

Is it time for you to mix family and business?