Fees (Image: Shutterstock)

How we buy and consume television today looks much different than it did 20 years ago. In the late 1990s and early 2000s, the only way you could access the shows you wanted to watch was through a comprehensive cable television package. Often, those packages included hundreds of channels, even if you watched only a dozen.

And of course, the bloat from having to support all those channels meant that cable TV prices kept going up as well. But in the past decade, cable TV has gone through a major overhaul, with people “cutting the cord” and choosing fewer channels, and a lower price, through streaming television services.

As much as we don’t want to admit it, advisory businesses are in a similar place that cable companies were 20 years ago. Cable companies who decided not to adapt to changing consumer sentiment got left behind.

If advisory fees — and how they are charged — stay the same, will consumers “cut the cord” on advisors, too?

When to Change

The value model for advisors has changed and continues to change rapidly. Adjusting and/or unbundling fees primarily makes sense only when you want:

1. To change a client’s perception of value vs. cost.

This gives advisors an easier introduction to reframing their value away from simply investment management.

2. A revenue stream not correlated to the markets.

After all, you tell clients not to pay attention to the markets, so why is your value to them predicated on market highs and lows?

3. To increase fees to keep up with inflation.

This isn’t possible with AUM fee schedules — no firm will raise its fee from 1% of assets to 1.1% of assets when inflation dictates.

4. To introduce new services.

If, like most advisory firms, you’ve added services that you have not charged for, now is the time to clearly communicate how you’ve improved. This change allows you to show clients that you’re not simply an investment manager, you’re an advisor for their entire life.

Presenting New Fees

Adjusting fee schedules is a process that won’t happen overnight. Every firm can go about this process differently, but one thing is certain: Changing fee structures will be impossible for firms that don’t have a documented service experience and value proposition for doing so.

To begin, your clients must understand all that you do for them for fee changes to be a success, and the only way they will understand this is if you communicate the value of your work to them regularly.

If you’re providing the right value, there’s no need to be afraid to talk about cost. Clients should be willing to pay a cost that is aligned with the value they receive.

What clients don’t like is not knowing what they are paying for. If you can communicate the cost of your value, you likely will have little client pushback on changes to your fee structure.

Examining Fees

It all starts with your service model and experience.

If you aren’t are uncertain of the complete value you provide to clients, then you need to document all that you provide. Begin by walking through the experience you create and identify how you interact with clients to see which areas you need to improve.

Once you’re confident that you are delivering an exceptional and repeatable experience for every person you serve, based on their client segment, you’ll be ready to approach the idea of changing your fees.


Jarrod Upton, CFP, MBA, MS, is senior partner and chief operations at Herbers & Co., an independent management and growth consultancy to financial advisory firms. To learn more about Jarrod, visit www.HerbersCo.com.