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,
- 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
- 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.
- 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!