Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
We need to implement a fee increase. We have clients who have been with us for over 15 years and have never had an increase. I acquired clients from a former advisor who refused to increase fees and he retired over four years ago. Many of these are his clients. My team tells me it’s crazy to think about doing this during the current virus crisis. But I think this is as good of a time as any because most of these clients only want phone meetings, and they don’t engage in planning with us. But they do eat up firm resources and over 15 years my costs have gone up significantly.
There are many clients who might resist the fee increase but most of the ones I believe will do so would be fine if they left the firm.
Am I wrong to consider this?
A.C.
Dear A.C.,
On the one hand, when is a good time to raise fees? On the other hand, is there ever a really good time to raise fees? I have a number of clients who are doing this in the fourth quarter in preparation for January of 2021. Just because the world has gone virtual, it does not mean your costs of running an advisory firm have gone down. In some cases, costs have gone up if firms are supplying team members with technology, printers and the like at home. One of my clients said it costs her over $500 every time a team member goes into the office to keep up with established cleaning protocols in her office building. Your clients are, of course, not responsible for those increased costs. But providing high-end service does not get cheaper over time.
The important thing I’ve found when implementing a fee increase is to put a clear communication plan in place letting clients know about the value they are receiving. When you increase fees, it is a good time to do what I call, “re-tell and re-sell,” meaning you remind clients of the value of working with you, the benefits you provide and let them know – if you have not increased fees in a while – how costs have gone up but you have managed to keep fees low for many years. No matter what business you are in, when there is a price on something, it’s critical to assign a value that seems greater than the price to the buyer!
Start to communicate the change early in the fourth quarter so your clients are prepared. Craft a nice letter to them thanking them for their loyalty, reminding them that you have not raised fees during their tenure with you and then outlining the business model you offer and the value associated with it.
If you can’t create a story of value, then look at your client servicing communication and approach and ensure you can support a values-based discussion.
Dear Bev,
Why don’t some people listen? We are rolling out a new aspect to our client-service approach, it’s a software program we’ve worked for months to implement and customize to our environment. It’s going to make our advisors’ lives so much easier and it’s a boon to our clients who will get a very robust and deep planning experience. We’ve always been excellent asset managers, and this enhances what we do. We have meetings to discuss how to talk about this with clients, how many clients should be migrated and what types of clients will most benefit. When I check results, no advisors are doing what we agreed. It’s like dealing with my children; I say something and then I wonder if my words are silent because nothing happens.
These are not virtual discussions and our team isn’t logging into the software virtually. We are back in the office and are able to meet, with masks and distancing, in our conference room and people are at their own desks.
K.T.
Dear K.T.,
Are you sure they are hearing what you think you are saying? I’ve had thousands of conversations with people over the years who were “crystal clear” about what they told someone. I’ve had as many conversations with people who, when asked what was said, were not only not crystal clear but were quite muddy about what they heard and understood. I’m not saying this is the case here, but it’s often the first place I start to try and unravel a dissonance.
The next place is to look at process. Have you laid out a clear plan of action for your advisors where they know exactly what is expected, when, and what they need to do – and probably including some language they could use with the clients. I understand this is positive progress, but many people resist change and your advisors could be struggling with how best to convey the new approach. We have had a number of our clients institute planning. Sometimes they meet with resistance from the clients because this isn’t what they have expected from their advisor. Some clients might see it as an intrusion. It isn’t always easy to tell them it is good news. I am a big proponent of planning and believe you are doing the right thing for your clients, but I also know some clients don’t embrace the idea of it wholeheartedly!
Ask your advisors about their obstacles to success the next time you get together and discuss this change. I like the “obstacles” word because they can be addressed and overcome. Sometimes people won’t admit to a problem or an issue, but most everyone can identify obstacles. If the next time you get together you are more inquisitive about what’s in the way and what needs to be considered, they might be more forthcoming about what roadblocks they are facing.
Often it isn’t that someone doesn’t want to, or won’t, do it. It’s that they don’t have the clarity – the process and the support to do what is needed. Leaders often make assumptions that because something is clear and understandable to them, it’s clear (and easy) for others. Rather than keep pushing the way you have been pushing, get curious about which pieces of the puzzle are missing for folks. There is definitely some obstacle in the way; you will need to uncover what it is!
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. The firm also founded and manages the Advisors Sales Academy. She is currently an adjunct professor at Suffolk University teaching undergraduate and graduate students Entrepreneurship and Leading Teams. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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