Maybe we are getting ahead of ourselves with this topic.
With an increase in interest rates and rising inflation, it is possible fees
charged to clients might be going up too. Here are a few pointers.
1. Do: Be the one who initiates the conversation. A
change to the client fee schedule is rolled out along with a change to advisor
compensation. The firm often uses both to channel behavior. Look at the big
picture, where the firm is trying to go. Now call the client.
2. Don’t: Assume clients won’t notice. It is tempting
to “Let sleeping dogs lie.” The change in client fees will be talked about in
newspapers, cable TV financial news, websites, blogs and on social media. If
you don’t get in touch first and outline reasons, someone else will do it for
you. Maybe even a competitor.
3. Do: Know and defend the reasons. The firm has
likely invested a lot of money in new systems. The technology is much better.
Clients can access data in real time. The technology may now be portable,
making at home portfolio review easier. How is the money the firm is collecting
(and spending) benefiting the client?
4. Don’t: Blame the firm. It’s easy to get into a
“them” and “us” mentality. Yes, you want to side with the client because you
are representing their interests, but your paycheck comes from the firm.
Clients value loyalty. You do not want to imply you will throw someone under
the bus once something inconvenient happens. Your client considers you an
extension of the firm.
5. Do: Review your past history. If you have a
long-standing relationship, you have done a lot to make your client’s life
easier. A major part might involve handholding, but so is keeping in touch,
letting them know you are on top of things. You may have helped them get access
to cash when they were in a foreign country or anticipated problems. Recap the
high points in your relationship.
6. Don’t: Immediately offer to discount. This implies
you are scared the client will bolt. They only see you as providing a service
for a fee and the balance is precarious. You do a lot more for them, but
sometimes people have short memories. Remind them.
7. Do: Segment the increases. Your client does
business across several product areas. Fees might have risen on individual
stock transactions, but not on managed money or buying bonds. Let them know
some product or services may have increased fees, but others have stayed the
same.
8. Don’t: Assume it’s an across the board increase.
Your client might morph “fee increases” into raising the cost of the entire
relationship. If that’s not the case, let them know fee increases are
localized.
9. Do: Show clients how they can save money. Fees
might be increasing, but there should still be breakpoints in managed money,
fee-based accounts and mutual fund purchases. Let them know fees can remain the
same (or decrease) if they bring more assets into the firm.
10. Don’t: Forget about other product areas. A banker
once used the expression: “The more you do, the cheaper it gets. You have seen
the TV ads about bundling insurance products. Let clients know how fees can be
reduced if they use more products.
11. Do: Let them know their options. You are the
client’s primary point of contact. If they want to speak to someone higher up
to express their displeasure, have a path to make that happen. Your office
manager is logically the next step up.
12. Don’t: Present it as a done deal. The fee
increase takes place on a specific date. Maybe it happens in stages. Let them
know the timing. The client might choose to shop around or talk with a
competitor. The chances are once one major firm raised fees, the others did
too.
13. Do: Tell clients how much you value the relationship.
The relationship you have cultivated has value. Your client probably places a
high value on it. Remind them you feel the same way.
14. Don’t: Project that nothing else will change, only the
price. If nothing will change but we are just charging you more, the client
may feel the firm is greedy. The client isn’t benefiting. What has the firm
done in the last few years that benefits the client? It might involve
technology upgrades. How has the firm’s investment helped you better service
your clients? Tell them how they benefit.
No one wants costs to go up. Clients and advisors are seeing
it happen everywhere in their personal lives. It’s logical it will happen
within the financial services industry too.
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