5 Easy Steps to Successfully Charging Fees

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.

How to Address Financial Advisor Fees in the First Meeting

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 side of a transaction and wondered, ‘What is this going to cost me?’ you understand the uncertainty that question can create. Advisors should be prepared to address fees confidently when the time is appropriate. The most effective time to introduce this conversation is after rapport has been established and value has begun to form, specifically, once the client understands that you follow a clear and disciplined process. This typically occurs near the end of the first meeting.

The “Fair Enough” Framework

A conversation like the one below would be a good framework to follow:

“I’m often asked ‘what is this going to cost’ or ‘how do I get paid?’ It’s an important question because most financial professionals do things differently than we do. In fact, many advisors operate on a purely sales-based model rather than a consulting-based model. As you can imagine, the development of a comprehensive plan that factors in all your concerns, goals, and dreams takes time. Our process works like this – today’s meeting is entirely complimentary. As we learn more about you, we are better equipped to identify the areas in which we can create the most value for you and your situation. If we decide to move on to our Discovery Meeting (next meeting), I’ll be able to provide you with an outline regarding services, and costs associated with them. At that point, you’ll be able to make an educated decision about the cost and the benefits of working with us. Is that fair enough?”

You don’t need to follow that script exactly, but the basic structure of it disarms the prospective client and begins to let them know that you have a process in place. You will also notice the last two words: “fair enough.” That is a powerful phrase to get them to acknowledge that what you’ve proposed is more than fair and they are now more informed about what to expect moving forward.

Step #2: Build Value

There’s an old saying in our industry: "Price is only an issue in the absence of value." If a client hesitates at your fee, it’s usually because they don’t yet see the tangible impact of your work. Since financial advice isn't a physical product they can touch or hold, you have to make the "invisible" visible.