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The Intentional Advisor

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Denver, CO 80210

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Willy-Nilly is NOT a Strategy

February 3, 2017

Charging people what you think they will pay is not the right thing to do.  If you want to be treated like a professional, you need to act like one.  Having a pricing strategy is really the first step. Let's take a look.

 

 

Great Question

 

I was contacted by someone who has a business partner who isn't on board with charging planning fees and he wanted to know what I thought.

 

Now, keep in mind that I am not a compliance officer or a DOL expert, so this is my perspective and nothing more.

 

People value what they pay for. 

 

Charging people what you think they will pay is not the right thing to do.  If you want to be treated like a professional, you need to act like one.  Having a pricing strategy is really the first step.

 

What you give them for free is worth what they paid for it.  If you want the client to behave differently and engage differently, it is very difficult to get them to do that without a change in fee structure.

 

Most people have a "fear" of setting up a fee structure. So how do you deal with "good clients" in your practice that you are afraid to ask for a fee?

 

1.      Realize they don’t have to pay a fee, if they are comfortable in the service tier that doesn't require one. 

 

2.      The story is one of evolution and improvement, not charging a fee just because. "Dear client we have improved our offering. You can stay right where you are or you can partake in our new offering…."

 

3.      Some clients may actually be excited to pay a fee. More than once I have had a client say that they wanted to find someone that they could pay for objective advice and that my conversation about it was refreshing

 

Here is I handle this in my own practice.

 

I explain to the client that there is a new business model.  If they opt into it, they pay the fee like a new client (feel free to slightly discount if you want), but in future years the planning fee will be offset by AUM revenue.  So, likely they will not pay in future years as long as the revenue exceeds the minimum fee. 

 

What if the client won't pay the fee?

 

 At that point, you  clarify what they will be getting moving forward and let them know that you are happy to serve them in that manner.  If they want enhanced service in the future, they now know what you have to offer!

 

No matter what you do, have a pricing strategy.  Stick to it as much as possible.  Document when and why you did not adhere to the policy.  As your confidence grows, you will find less and less need to diverge from your policy.

 

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