Why do we charge a fee compared with taking a commission or receiving remuneration from the products and services we advise?
Some of us have been forced to by our regulator, it provides a regular source of income, it creates committed and qualified clients and we have fewer conflict of interest discussions.
It enhances our image as a professional consultant and allows us to be treated alongside our peers in the profession. It permits you to be rewarded for the value you put in not just for the hours you toil, with fees the client values your advice more since they have put a monetary value on it and fees are demanded by clients who don’t see you as a commodity or a product pusher and don’t want any conflict of interest.
It’s ethical and right – if handled correctly with the client – but occasionally adviser reticence can spoil the broth.
Why are we reticent then?
Many advisers are not, in fact my research shows that plenty of advisers are handling the issue of fees expertly, but some are not.
Much of it is nervousness about the value/fee relationship, caginess in case the client starts to negotiate or push back on your fee.
It’s this procrastination to enter into a discussion about their fees at an early stage of the relationship that sours the trust and generates future wariness on the part of the adviser.
But much of it is in the head.
The Inner Game battle – knowing your value
The Inner Game is a term which relates to what goes on inside our heads, our motivation, drive and state of mind when handling ourselves with clients.
The first step in mastering how to handle fees is to convince yourself that your fee is right, justified and a valid reward for the value you are to provide for your client. My research shows that some advisers have anxieties over their fee – they believe it’s too much or too little and doesn’t represent the value they provide.
The secret is to have confidence in the value you provide, to believe in this value yourself, to buy the value if you were in the market for the same.
In their book Competing on Value, Hanan and Karp talk about “knowing your value, price your value and sell your value”.
Without putting any more gloss on the topic, that’s the secret. If you believe in your value and service you provide, can articulate it clearly, then your fee is going to be received favourably and your client will not argue the case with you.
You need to believe in your value proposition and have this written down succinctly so that it distinguishes you perfectly from others in your profession.
So how can we verbalise our value proposition?
The 7 questions to ask yourself to know your value
Ask yourself the following 7 questions:
- Who am I?
- What do I do?
- Why do I do what I do?
- How do I do what I do?
- Whom have I performed services for?
- What makes me different from other advisers?
- Why should clients do business with me?
Have a trusted friend ask you the questions in a coaching style, audio record the answers you give and transcribe these into a value proposition or elevator pitch or sound bite. It doesn’t matter what you call it, just get it clear, succinct and valuable.
Then carry out some belief change work if you still don’t believe in your value. Email me and I’ll suggest some belief change exercises for you and some assertion work. Whatever we do, you simply have to be your own number one fan.
Now with your Inner Game settled in your head, let’s take a look at how experienced and successful advisers handle the fee issue with clients. Firstly we need to head back to the most fundamental requirement of any adviser/client relationship – trust.
Trust – fundamentally has to be there
We know that don’t we but were you aware that trust is built from three elements and your clients will instinctively look for these before they learn to trust you.
They are your competence in knowing what you’re doing, your intentions and ethics and finally your empathy and ability to connect with them as a human being.
Rather obvious but worth highlighting. Here’s a few new takes on the three elements to consider.
Your competence comes over time, and is probably something you’ve gained over years of study and experience. Don’t assume the client knows you’re competent. Don’t brag but focus on showing them that you are a safe pair of hands.
Explaining things simply and clearly has been recognised to be the best method of proving your competence.
It’s easy to make something simple become complicated but it’s very skilful to make something complicated appear simple. That’s the mark of competence.
The other point about competence is the impact of the team around you. Approximately 20% of your client’s contact will be with you; 80% will be with your support team. So do they demonstrate competence? Exams are one thing, being able to relate and explain things is another.
Empathy and relationship building is for another day, intentions and ethics link straight to the fees handling issue, so we need to secure this.
Ethics and intentions
Ethics are how you do things naturally, honesty, trustworthiness. All essentials.
Your reputation, your brand comes in here – your underlying intentions are key. The problem is that not handling the fee issue can cause terminal damage to how your client sees your intentions; they’ll begin to see a chink in your integrity if we gloss over fees, procrastinate and put off the conversation.
Being up-front and clear, very transparent about your fee structure builds trust. Not being clear can damage irrevocably the relationship you need.
Openness and transparency are key.
So how do we make sure we do this?
The 4 underlying principles when discussing fees
I’ve mentioned the word a few times already – procrastination.
The first principle is not to avoid the issue. It’s easily done and I’ve seen it with many advisers. They’re worried about the outcome so put it off to the end of the meeting and that’s wrong.
The surgeon who has bad news for the patient is not going to put off telling you. He won’t enjoy the process, but he’ll sit you down and explain clearly and slowly, outlying the various options available.
I’m not saying we should compare our service with operating on a human being but the way the surgeon handles this tricky issue is the key.
Just do it, don’t linger as there’s a price to pay in trust if you don’t.
The second principle is clarity. The surgeon speaks clearly and succinctly so should we. Have a simple fee tariff, easy to explain and understand.
Don’t confuse the issue with science, be clear and precise. Give headline information and let the client delve deeper if they wish.
Provide a context
The third principle is to provide a context with your fee. Help them to see how the market sets the fee and where your fee fits. It might be higher or lower, that’s your choice, but explain clearly why this is so.
When I buy a car, I know what it should cost, Glass’s Guide helps me and the internet is fabulous at making costs transparent. This is a commodity, you’re not.
Finally, help the client refer to some documentation that outlines your fee clearly as possible. Don’t surround this with excess detail. All clients like to reflect after the meeting and having something to refer to afterwards is essential.
With the principles over, how do we do it?
How to go about it?
You need a process to follow, a way of working that suits your environment and style then stick to this process.
Very early on in the meeting you need to introduce yourself, the way you work and most importantly your value proposition. Remember it’s your value that justifies the fee.
Then talk about the fee, with confidence and self-assuredness. You’re worth it, as the TV ad goes.
Many successful advisers link this into only having a certain number of clients, so their time can be allocated accordingly thus giving value to the client.
Other advisers have allied this conversation to running their referral only business. Because my business grows by clients referring their friends and associates I ensure each client receives the maximum value possible – I need to earn your referrals first with my value and service.
It’s all about words and confidence in what you do and the value you provide. Clients expect to be charged a fee for professional advice and want this to be made very clear upfront by a confident adviser who can articulate clearly the service they provide.
That’s really all there is to it.