The ‘Elephant’ in Fee Justification Conversations

GUEST COLUMNIST: Jim Stackpool

In a thought-provoking article, Certainty Advice Group MD, Jim Stackpool, says in offering comprehensive advice the moment an advisory team tries to justify their fee, they’re making a fundamental and critical error in their fee conversations. “The ‘elephant’ in fee justification conversations isn’t the fee, it is value,” he writes.

My favourite fee discussion is the topic of ‘transformative’ fees. These are higher-than-normal fees well outside the existing fee comfort zone of advice teams.

In the past, these high fees were mainly driven by securing ‘high net worth’ clients – i.e. those with the money to pay.

In the future, if teams believe in the benefits of value pricing, these fees will be driven by securing clients with significant complexity – regardless of assets or product needs. We find, properly positioned, clients will even go into debt to pay the fee as this advice debt will get them out of debt better than by any other means.

The best bit of discussions about how to position, price, and deliver the transformative fee conversation is “how do you justify the fee?”.

If you’re offering comprehensive advice, I reckon the moment an advisory team tries to justify their fee, they’re making a fundamental and critical error in their fee conversations.

Because fee conversations that justify price based upon the range of services provided, or comparisons to external parties, or worse, introduce discounting, miss the point of the client objection.

The ‘elephant’ in fee justification conversations isn’t the fee, it is value. The core of value pricing is value.

…When clients or prospects question a fee …,they are questioning the value…

When clients or prospects question a fee (regardless real or perceived), they are questioning the value.

The response to any perceived or real fee-justification objection from clients or prospects is best handled by focusing on the value the client will experience due to the proposed advice relationship.

What value won’t the client experience, what are the consequences for the client’s life, if they don’t engage?

Advisory teams that are forearmed with the outputs from a thorough due diligence of the client or prospect’s whole financial life, including their unmet aspirations and their unresolved complexities, have the points of value that need to be focused upon when perceived or real objections are tabled.

Anything else can too easily become a subjective ‘beauty parade’ of options that are rarely comparing ‘apples with apples’.

Of course, not every new prospect or re-signing existing client will re-engage. That’s normal.

But as long as the majority of new prospects (approx. 66%) and the vast majority (approx. 80%) of existing clients agree to the value, your fees don’t need better justifying, just better positioning.

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For nearly 30 years Jim Stackpool has influenced, coached, and consulted to advisory firms across Australia. As founder of Certainty Advice Group, he leads a team of professional advisory firms seeking to create greater certainty for their clients. As an author, blogger, columnist, and keynote speaker, Jim is regularly called upon for his professional insights into the advice industry.