Lesson 1 | The Psychology of Fees (5:12 minutes)
Let’s get into the psychology of fees. Our view on fees is that not only does your planning have a separate and distinct value, but so does your advice. For this reason, we consult our clients on keeping the planning and advice separate from the implementation and management of investment and risk-based products.
There are several reasons why adding fee-based financial planning into your
existing practice is a smart business decision. Here are the top 10 reasons why advisors today are incorporating fees into their business model:
- Clients are more engaged in the process
- The process moves faster
- It weeds out the tire kickers
- Avoids the elephant in the room – which is clients wondering how you’re going to get paid
- Clients view you more professionally rather than just a salesperson.
- Implementation increases – because clients can connect the dots that the recommended product will move them closer to their goals.
- Heightened quality of introductions from clients - Studies have consistently proven that clients and other centers of influence are more comfortable referring someone to a financial advisor when they know they are going to charge them a fee.
- Heightened quality of introductions from COI’s
- You’ll get Compensation for your advice, knowledge and time
- It’s An additional stream of income
So with all those benefits, why don’t advisors who can charge fees, charge fees? Well just because you want to, doesn’t mean it’s easy. Let’s address some of the reasons why some advisors who can charge a fee, DON’T, and what can be done to overcome it.
- They’ve never charged before and charging a fee might get in the way of moving a prospect forward. Like anything you do that’s new, it’s going to take some time to build up your confidence. Once you see the Approach Talk that we’ll outline for you, you’ll see and the client will see the value you are bringing to the table from the very first interaction and how you’re working on their behalf to get them to where they want to be. You’ll be able to show them how you’ll put a qualitative plan together that will outline WHAT it is they want to accomplish along with your recommendations to get them there. People these days are craving that clarity, so it will not get in the way of moving them forward, it will actually move them closer to you.
- They worry they’ll lose clients. Advisors think that clients will be turned off by a fee. The reality is that most clients expect to pay a professional for their time and expertise and this is no different. Fees are becoming more and more commonplace. Don’t devalue yourself or your time.
- The thought of, “Am I worth it?” This is a big one and something that we can equivocally say, yes you are. Don’t commoditize yourself. Your advice is much different than the products you are recommending, and you should be paid for your time to come up with a plan, whether or not the prospect chooses to implement with you.
- Feeling like now that you’re charging a fee you have to do more for the client. Doing more can slow down sales and overload your team. As you go through our Discovery Process, we’ll show you how to get at a clients Values, their vision for the future, and the goals they want to accomplish. The client will have clarity around all of these things and the fee is to put that plan together with your recommendations and advice on how to get them where they want to go.
You might be able to see a common thread here, and that is that all of these things are in the Advisors head. As you think about the process of adding fee-based financial planning into your existing practice, there are a number of things that are going to run interference in your mind. It’s important to point out that while these thoughts are real, they can be overcome and have been overcome by your peers. As with anything, the more you do it and practice it, the more confident you will be and the better the results.
Once you begin to have some success and get some confidence around it, you will quickly see how fees have a positive impact on the speed in which clients implement, and more importantly, how connected they feel with what they are implementing. Over time, you will also find that fees can become a measurable part of your business’ bottom line and cover a fair amount of expenses.
Here is your Action Task: Review The Why and How of Charging Fees whitepaper in the Lesson Downloads. It covers some things we won’t get into in the course like How to Ask for the Fee with Existing Clients, How to ask for the fee with Prospects, Incorporating Fees with Joint work partners, etc.