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5 Easy Steps to Successfully Charging Fees

5 Easy Steps to Successfully Charging Fees | USA Financial
Jul 17

Charging fees for your time in the financial advisory space is nothing new. However, it has garnered more attention from inside and outside industry circles as the fiduciary discussion continues to take center stage. The guidance shared in this guide assumes you are properly licensed to engage in this activity.

Charging Fees_Cover_2023

We believe it is important to note the distinction between charging fees for your time vs. fees for assets under management. While they fall under the same regulatory scope, the two must be viewed through separate lenses considering what they represent. Fees for your time, whether hourly or by project, are typically associated with a specific moment in time and related to a particular action or series of actions during that moment. Conversely, fees attached to assets under management typically imply a continuous activity along with ongoing monitoring. Notice we said “typically” in both instances. Advisors can certainly structure a “fee for time” arrangement in such a fashion where it stretches beyond a moment in time. For the purposes of this report, we will separate the two as we believe one has more to do with “advice in the moment(s)” vs. “management over time.”

The following steps are designed to share best practices for charging fees for your time. If you are currently not charging fees for your time, the most important thing to understand is that making this work within your practice has very little to do with the makeup or structure of your practice. If you genuinely create value for your clients, they will not balk at the notion of you charging a fee for your time. However, the first person who needs to be comfortable with this idea is you. You need to be confident in the value that you create for your clients, and you need to deliver on that value for the fee model to work.

Step #1:
Communicate with Transparency

As you take a prospective client through your process, you cannot leave them guessing about what is next. Most consumers do not have a clear understanding of how our industry works; as a result, they have a genuine need for information about what to expect. That includes how they may end up paying for your services. An informed consumer is far more empowered to make an educated and confident decision.

With that said, it is not necessary to tell them the exact fee that will be charged the moment you meet with them. In fact, you may not even know what the fee will be until you uncover more about their situation. If you have ever been on the consumer end of a transaction that had you wondering “what is this going to cost me,” you know that it can be an uneasy feeling. Be prepared to address this question should it arise. The most ideal time to share this conversation is after you have established some rapport and built value by demonstrating that you have a process that you follow. This will typically happen as you approach the end of your first meeting. A conversation like the following would be a good framework to follow...

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