The industry discussion of advisor fees realistically is not an issue with fees. The issue is with the communication of the value associated with the fees. Most advisors provide value beyond the assets under management fee structure. But in many cases, the fees are presented only in relationship to assets under management. Do you see how that can become problematic?
When fees are presented only as AUM-related, then the only value really is the investment process that drives the investments. There are many problems with presenting your fees this way as the industry changes and new low cost options continue to infiltrate the investment business.
The key is to present your value with the precision and confidence that you deliver your value.
If you’ve ever been asked a question like these below, it may be time to rethink the fee discussion:
‘What am I paying these fees for?’
‘How do you compare your services to [XYZ advisor]?’
Several firms have begun changing the way they present how they get paid. We call it a core story. It is not the elevator statement or value proposition but an in-depth description of what you get paid for. It is your Value Conversation.
If delivered in a segmented way, your fee/value conversation can be done clearly, concisely, with precision, and can be understood and remembered by the client. Think of presenting your value by segmenting it into 3 distinct categories that each have an associated fee. For instance, one advisor we work with states …”There are 3 things that we do: Complete Financial Planning, our Investment Process, and Family Office Services.” He discusses each in detail and then associates a sample fee based on the value for each of the three categories. In closing the conversation, he presents one overall, average fee that is less than the 3 individual segments. His clients understand it and he does not have a fee issue. His clients know his value.
You may not be ready or able to change the model in which you charge fees. But you can change the way you communicate all the value you bring. Think about changing the way you discuss what you do so that every client knows you are worth it.
We are in the process of writing our Value or Core Story.
Would this “advisor you work with” be willing to give any further info on this 3-step idea?
Hi Ray, We have 100+ advisors we work with using this 3 step model to describe their value. Many use a variation of what I’ve described in this article. What else would you like to know about this? Delivery? Style? Happy to help!