6 Tips for Advisors When Talking Fees With Clients

If there is one conversation that many advisors dread more than any other, it’s the fee conversation — whether it’s with prospective clients or telling existing clients that the fee they charge is going up.

However, all too many advisors make the fee conversation more awkward and complicated than it needs to be, according to industry experts who spoke during the recent Kitces.com webinar “Introducing The Fee Conversation To New And Existing Clients (How To Talk About What You Charge Without Being Awkward).”

The fact of the matter is the value that a good advisor brings to the table today is significantly more esoteric than it was in years past and relies not just on an advisor’s own knowledge and expertise but also on their ability to deliver positive client outcomes, according to Michael Kitces, head of planning strategy at Buckingham Wealth Partners and chief financial planning nerd at Kitces.com.

Meanwhile, because investors today have access to much more information than they did in years past, it is likely that, at some point, a client is going to push back on an advisor’s pricing and wonder why they should pay more than what another advisor with a seemingly similar “comprehensive financial planning” offering charges or more than what an even less expensive robo-advisor charges, according to Kitces.

Below are some of the standout tips for the fee conversation that were provided during the webinar by Kitces and his expert guests: Bill Bachrach, CEO and chairman of AdvisorRoadmap and Bachrach & Associates, and Carl Richards, a certified financial planner best known for his decade-long “Sketch Guy” column in The New York Times.

1. It is crucial to convey the value that you offer during an introductory client meeting.

“I have a favorite saying, and that’s the success of what you’re currently doing is built on the foundation of what immediately preceded it,” Bachrach said.

“Truly comprehensive financial planning, truly being a trusted advisor” is much different than being a salesperson who “gathers assets or uses planning as a tool to sell a product rather than real planning,” he said, noting that advisors should convey that to prospective clients.

But “what precedes this discussion about the value in what you do” is important, he said, suggesting advisors schedule a meeting with both spouses, asking them to have all their financial documents handy, “preferably in your office” or by Zoom but “never at their home, never in their office where there are a lot of distractions.”

He also suggested that advisors all use a financial roadmap that is visual, “engaging” and interactive when meeting with prospects. From there, it’s best to proceed to ask them what their core values and “tangible goals” are and what their “current reality” is, he said.

All of that helps to build an “emotional connection” with the prospects, he noted. “In the first 15 to 30 minutes, you’re asking them questions that have them thinking about things that the financial people they’re currently working with are not asking,” he added.

And all of that should be done before you actually invite them to become a client, he pointed out, noting it should be made clear to prospects that the reason they should become your client is that you have a higher probability of achieving all their goals that are the result of their values.

“The mistake that most advisors make” is asking too few questions during such meetings and just providing prospects with a vague list of what they offer clients, he added.

2. Record the initial conversations with prospective clients.

Bachrach has been recording conversations with prospective clients for decades, he noted. It’s helpful to also use a “scripted, repeatable process,” he said.

After recording the conversations, advisors should review the recordings to find mistakes you should not make again and remove from the script if they’re in there, he said.

“There’s a lot of failure involved in actually grading scripts that work,” he pointed out.

3. Provide prospective clients with an ‘experience.’

Richards agreed with Bachrach but added that the “best way to convey our value add versus the fees in the introductory prospect meeting … is to give people an experience.”

Richards explained: “I don’t think you can talk about it. I don’t think you can print it on a brochure. I think the only way they can understand at some level is to have the experience” and it should be “an experience that they’ve never had before.”

It is highly likely that “no one’s ever asked them” their thoughts on money and “no one’s ever listened to the answers,” according to Richards, who added prospects will appreciate feeling heard and understood.

What prospects are typically saying to themselves is “I have a desired future state, and I am going to discount your value — the value I place in you — based on the uncertainty I have about your ability to get me to the desired future state,” he added.

Kitces agreed, saying: “Show me a prospect meeting where the prospect talked 80% of the time and it’s a very high likelihood that they’re going to end [up] doing business” with you “because, at the end of the day, if they feel like they got their stuff out there and they feel heard,” that tends to work in the advisor’s favor. He suggested advisors repeat back to the prospects what their goals are to make it clear that they’re listening.

4. Tell the truth ‘succinctly and directly.’

Bachrach suggested that advisors tell prospects the truth “succinctly and directly in a way that’s all about them; that’s the formula.”

It could sound something like, ‘well, for the work that needs to be done so that you can … achieve these three goals that you’ve described here in the timeframe that you want….” he pointed out.

He added: “Then you confidently follow that by just saying the number and ‘our fee for that is …’ and then you ask a question, ‘would you like to get started?’ And they’re either going to say yes or no, or they’re going to ask a question.”

5. Keep the fee discussion simple and don’t let it get in the way of listening to prospects.

“The whole fact that you’re distracted in your head trying to calculate what you’re going to charge and how to communicate” is a sign that you may be focusing more on that than what’s much more important to prospects, Bachrach said.

After all, he said: “You’re supposed to be listening to them and all this clutter in your brain, trying to sort that out, is disrupting what you’re mainly supposed to be doing.”

6. You’re probably better off without clients who don’t want to pay what you charge.

When it comes to the fee, the worst-case scenario is a prospect decides not to become your client.

“If they’re not a good fit … you don’t invite them to become a client and you move on to find the people who are really the right fits,” said Bachrach.

Richards agreed, saying you can suggest a different advisor the prospects can go to if they’re not a good fit for you.

Kitces went on to point out that the same concept works when it comes to raising fees for existing clients.

If most clients are willing to pay for the “value of the advice that I deliver, I don’t really want to spend as much time with clients that are significantly below that,” Kitces explained. After all, there are only so many clients that an advisor can effectively serve and if you lose a couple of clients because of a price increase, you will likely be able to add new clients who are a better fit for you, he added.