Though the financial industry is gravitating more and more toward advice-based advisors and away from commissioned-based ‘salespeople’, some of my clients (and likely many of yours) are still confused about how fees differ between the two groups. This is especially true of clients who have always worked with commission-based advisors and have just now made the shift when they decided to work with you. The absolute worst thing you can do when it comes to explaining your fees and how you get paid is to not talk about it. Your clients want and deserve to know how your fee structure works and why it is the way it is. Here are some guidelines to help you navigate this conversation.
Talk About It Often
More than likely, you explained the fee structure to your clients when they first came on board. However, many advisors make the mistake of thinking that once is enough. The more often you discuss your fee structure with your clients, the less likely they are to question it. You should also put your fee information in writing and provide a copy to each client. This takes into account those clients who learn information better by reading it and a written copy also legitimizes the information in your clients’ minds. Talking about the fees and putting it in clear and concise writing adds to your transparency and will increase the trust your clients already have in you.
Show Them the Value
It’s important that your clients know you are not just their financial advisor—you are also their financial counselor and mentor. In addition to helping them plan for retirement and effectively manage their wealth, you should also make sure they know you can also help them discuss money as a couple without fighting, help them work through tough life transitions like mid-life crises, and even train them to think about money in a more positive way. This will help your clients see that the fee they are paying is not just for financial advice and will help them appreciate the many layers of your relationship.
Compare and Contrast
Though no one wants to throw their competition under the bus, it’s important that you show your clients the differences between your business structure and that of commission-based advisors. Point out that other advisors make money off each transaction and how this can lead to them making selfish suggestions. Explain how everything is included with your monthly fee and that you never make additional money no matter how much (or little) activity occurs. If your clients have doubts or want you to justify your fees, pointing out the differences should help them see why they are better off with an advice-based consultant.
It’s vital that the conversation with your clients about your fee structure is just that—a conversation. It should not be a one-way street where you do all the explaining and they sit and listen. Engage your curiosity to find out how they feel about your fees and encourage them to ask any questions they might have. Be candid and honest with your answers and make sure they know you’re willing to talk about your fees any time they want to know more.
You already know that an advice-based structure is the best for your business, but that doesn’t mean some of your clients won’t need a little more convincing. When you bring on a new client or have clients who have questions about your fees, use the above methods to guide the conversation. Want to chat more about showing your value to clients as an independent financial entrepreneur? Please reach out! It’s one of my favorite topics!
When you become a mentor to your clients, deeply understand them, and guide them toward a better future, then you’ve learned the ways of a financial caregiver. You’ve come to know what it means to be a true purveyor of advice, and how to use money as a conduit to a more fulfilling life for yourself and those you serve.
Patrick Tucker, owner of True Measure Wealth Management and founder of True Measure Financial Advisors, has over 20 years experience in the industry and has spent the last 15 years learning the ins and outs of the fee-only advisory business. He’s spent over $500,000 finding mentors, studying consulting businesses, taking courses, studying the soft sciences, running trial and error experiments, and learning how to be an entrepreneurial financial advisor. He’s simplified this into an easy to use blueprint for anyone who is entrepreneurial-minded and is tired of the sales culture. Patrick has been able to acquire over $158 million under management with little to no money spent on marketing.