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Tell Clients the Truth About Your Fees

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What You Need to Know

  • Low fees are not necessarily a sign of sainthood.
  • You need to earn solid fees by doing a great job.
  • Intangible benefits are worth something, too.

“The bitterness of poor quality remains long after the sweetness of low price has been forgotten.” —Benjamin Franklin

Selling on price has been a staple of commerce for quite a while. I imagine old Ben thinking about carriage builders, silversmiths, furniture makers, and maybe even kite makers! But whatever he had in mind when he made that statement about 250 years ago was true for the artisans and craftsmen thousands of years before and hundreds of years after. Consumers like a good deal, but they despise being cheated as the result of shoddy quality.

Even the most frugal among us are willing to pay a little extra for something that will not fall apart after the first use. Even if we are not impressed with status, we want a product or service that does not make us wish we had never spent our money for it. We think about that when we purchase our houses, our cars, our clothes, our furniture, our jewelry, our vacations, our personal care, our anything.

We think this way. Our clients think this way, too. If our clients also feel this way, is it likely they would generally put fees at the top of the list of things to consider when choosing, or staying with, an advisor? The logical answer is “No.” And, for most of our clients, that is probably still true. But, for a growing number of consumers, fees are a frequent and early topic of conversation. Why?

Indeed, the regulatory climate and the very appropriate requirements for transparency and disclosure contribute to the discussion, but that discussion would still be minimal. The main reason for consumers’ heightened awareness of fees is that there are highly effective advisors/ marketers who have made fees the number one issue. In the classic “David vs. Goliath,” “Us vs. Them” pandering, they promise to protect the consumer from “those other guys” and their predatory practices. How? By charging fees so low, they should be considered for sainthood! So, how do we re-frame the conversation?

We start telling the truth about fees.

We show the value of our service and performance. (By the way, if our service and performance are only average, they probably should pay less somewhere else.)

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If our fees increase as their account grows, we remind them we are still getting paid if their account loses value, and we expect to be held accountable. This would be an excellent time to show them your accountability plan. No plan? Then this would be an excellent time to come up with an accountability plan.

Do not confuse fees with commissions. Fees come out of our client’s pockets. Commissions come from the financial institution’s pockets. There are many other product factors to consider but do not lose credibility because you do not know the difference between fees and commissions.

We explain the difference between tangible and intangible benefits. If my clients receive advice, service, access to information, etc., for their fees, they are receiving intangible benefits. If they receive a guaranteed lifetime income or a guaranteed death benefit, or some other financial benefit, they are receiving tangible benefits. The value of those benefits depends on the needs of the client.

We emphasize value. That means we honestly assess our services and our performance. We take a hard, consumer-oriented look at how we compare to the marketplace as a whole and charge a price that will allow us to serve our clients for the rest of our careers.

For those who can only differentiate themselves with low fees, we leave them to the perpetually dissatisfied clients who are already shopping for their next advisor.


Stephen Dybwad (Credit: Bill Broich)Stephen Dybwad is a retirement planner based in Nineveh, Indiana. He’s also the host of the Steve Dybwad Safe Money Radio Show.

(Image: Shutterstock)