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How Do You Ask Clients To Pay More ?
Every advisor should be able to rationalize what they charge — and know how to explain it to clients .
By Matt Matrisian
TO REMAIN COMPETITIVE , FINANCIAL advisors are increasingly expanding their service offerings as their clients expect a more holistic financial experience . Yet despite offering more , advisors are often not compensated for it .
My team and I speak with advisors every day about their businesses , and we often find that many of their fees are not keeping pace with the services they are offering , keeping up with inflation , or changing to reflect what their peers are charging . Often it ’ s only a small portion of the clients generating most of the revenue , and since the others are generating next to nothing , advisors can be making less than $ 10 net revenue per client ( after expenses ).
With that in mind , it ’ s crucial for advisors to regularly reevaluate their fees — and whether they should be increased . It ’ s not an easy decision . Every advisor knows that client satisfaction is paramount , and it can be emotional and difficult to approach longstanding , valued clients and say they must pay more . But it ’ s sometimes necessary if you want to continue to grow your business and meet your own goals .
The good news is that there are more solutions to the problem than you might think .
Here are several considerations and best practices for advisors evaluating their own fee structures .
Getting Started
Before making any decisions , advisors need to have a comprehensive view of where they stand . It ’ s easy for them to see money coming in and assume everything is fine , but by doing a robust
audit they may discover whether their profitability is less than they thought . Through the hard data they find from an in-depth evaluation , they can find the evidence they need to confidently approach clients and justify fee increases . It ’ s something they should do at least once a year .
During this evaluation , they should look at the net profitability for each client , taking into account all the costs associated with delivering on their segmented service model . In addition , they should compare their fees with the averages in their region . They may want to enlist the help of a third-party business consultant who would have additional insights and guidance on industry data and practices .
Having The Conversation
Once advisors have figured out where they stand in the fee landscape and made the decision to adjust their charges , it may be tempting to apply the increases only to new clients . But that won ’ t provide enough immediate revenue to boost profitability .
It ’ s critical that advisors maintain the strong client relationships that they ’ ve built over many years , and it ’ s understandably difficult for them to think about approaching current clients and
28 | FINANCIAL ADVISOR MAGAZINE | NOVEMBER 2024 WWW . FA-MAG . COM