Advisors are being asked to provide more value and more services than ever before. At the same time, the costs of running a practice—office space, technology, marketing, supplies and staff have all continued to rise. Despite these increases, most have not considered raising their fees. Perhaps, now is the time.
The decision to raise fees is difficult. It’s not just deciding your services are worth more money. It’s deciding you are valuable enough to charge more. Pricing is only an issue in the absence of perceived value.
Advisors who have made the move, agree preparation is essential. Before you embark on this process, ask yourself these important questions:
Do you have a good reason for raising fees?
Some advisors raise fees because they’ve undercharged for years. Early on, many lack confidence in the value they offer, so they make up for it with fees that are too low. Raising fees requires advisors to give clients something more than the client got before. You need to deliver noticeably better service. Financial advisors who are considering raising their fees must prove their quality of service is high, and show clients have benefited from it.
Is an across-the-board hike necessary?
Before raising prices, advisors should take a hard look at their practice and their client base. It’s possible only a few clients need fee adjustments. Consider the amount of time and attention each client requires. If a handful require far more time than others, their fees should reflect that level of service.
Do you have a plan?
You will need to develop steps that implement the increase gradually. Consider setting a timeframe for the implementation of the new pricing structure with your new clients and your existing clients. Schedule review meetings to ensure discussions take place in the required timeframe. Advisors who have prepared carefully before raising fees find the response from clients is typically more positive than expected.
What’s the best way to justify a fee increase?
First and foremost, be confident. The first few discussions with clients will be the hardest. Advisors need to demonstrate and clearly communicate their value. They need to be assertive without being defensive. Without confidence, conversations about raising fees can be incredibly painful. The single greatest driver of a successful fee increase isn’t even about the value to the client. It’s about you. It’s about how confident you are in your value.
Be prepared for some objections
Preparing for potential client objections to the new pricing structure can ease discomfort. Create a list of likely objections and prepare effective responses that will reduce client concerns. You still may lose a client or two if you raise fees. But even from a pure business perspective, that isn’t necessarily bad.
If you think it’s time to evaluate your fees, I invite you to contact Iron Point for a no-obligation coaching call. We can provide more information on how to best represent your true value as an advisor and communicate it to your clients.