How do you convey the value of your advice fee?
I don’t want to pay that much it’s too expensive!!
Tell me you haven’t heard this before.
This is the common response for any advice fee you put out to a client for your time, experience, and services. As a financial adviser, you know the value you provide to a client far exceeds the advice fee itself. But how do you convey it to the client in a simple and easy to understand way?
Simple. Break it down into the following three areas by conveying it through diagrams or tables depending on your clients learning process:
- Hourly Rate – which is the rate you charge for an hour of your time and that of your administration team to work on the client’s advice
- Tasks Required – a breakdown of each and every task required to complete the advice from documenting the information in a fact find through to implementation
- Fixed Expenses – the costs to produce the Statement of Advice such as the paraplanning costs and time to completion.
For the sake of the scenarios below, we won’t go into each and every expense you have in your business from rent, internet, CRM etc. You will have to factor this into your hourly rate which may, in most cases, end up being between $220 to $550 per hour of your time depending on your operation.
With the three areas highlighted you may still come into rejection from the client, so let’s run through a few questions you can ask the client to put it into perspective for them:
Adviser: How much do you work for on an hourly basis?
Client: I work for $XX per hour.
Adviser: Would you work for $XX (divide their income by 2) of that doing the same job?
Client: No, I wouldn’t I would find another job.
Adviser: Would you work for free?
Client: No, I wouldn’t work for free as I have bills and expenses to pay for.
Adviser: After removing the fixed expenses from our fee and accounting for tax etc., you are effectively asking me to work for free and as you have stated you wouldn’t work for free, do you feel comfortable asking me to work for free? Because I will not be.
Adviser: When you work at your job, you have a set process for tasks to be completed that your employer has provided you for either internal or external reasons that you have to follow. Is this correct?
Client: Yes, I have to follow the processes to do my job.
Adviser: Similar to your job, I have processes that I am required to follow ranging from internal requirements of our business and external which are legally mandated by law. If we don’t follow the requirements by law we could lose our license and/or be fined heavily for not working in your best interests.
Client: Yes, but it couldn’t cost that much to do all the tasks, can’t you not do some things?
Adviser: We cannot skip areas that follow the process for acting in your best interest and providing quality advice to achieve your goal. If you were asked by a client at your work to skip internal processes set by your employer or skip processes that were legally required, would you?
Client: No, I wouldn’t as I would be fired or worse.
Adviser: Since you wouldn’t feel comfortable skipping tasks as you know the repercussions, do you believe I should do it because you ask?
Client: No, you shouldn’t.
Adviser: When we complete your advice and recommendations, we are required by law to present you a Statement of Advice and the cost to prepare a Statement of Advice varies based on the complexity of your advice. It could start at $250 for simple advice and go into the thousands depending on the strategy. When you do your job, you would most likely have fixed expenses that your business needs to meet to provide your service?
Client: Yes, we do.
Adviser: Now one of those fixed expenses may be the building costs for your employer and if the employer doesn’t charge enough for their services they can’t meet the building costs to provide the service. Would you be happy not being paid as the employer needs to pay for the fixed expenses from somewhere?
Client: No, I would want to be paid.
Adviser: Ok, so you have said that you would like to be paid and from this understanding the fixed expenses are priced into the service provided. Would that seem to make sense?
Client: Yes, it makes sense.
The goal of this line of questioning is to put it back onto the client to acknowledge that operating a business costs money and the service needs to be paid for. You ask them questions that relate to their situation to get them to see it from your eyes. You get them to acknowledge that they wouldn’t work for free, that they want to still be paid and that they have things they need to pay for in their lives.
If after acknowledging all this, they still say the fee is too high, then these clients aren’t for you. They will take you for a ride and may not even pay in the end. You need to find clients that not only value your advice and services, but who are willing to pay to receive it. Keep searching for the ideal client; one that pays for your time correctly.
We have developed a Value of Advice Guide that provides you a breakdown of the three areas being hourly, tasks, and fixed expenses that you may use to persuade your client to engage your services and pay your advice fee. If you don’t have something like this already, then you will be a step behind the financial advisers who do.
Best of luck with engaging your next client and conveying the value of your advice. It’s a value often overlooked by a lot of clients, but we know the great impact we can have on a client’s life.