The Fee-Worthy Playbook

NEVER NEGOTIATE YOUR VALUE: FOCUS ON WORTH, NOT FEES

As a financial advisor, how do you ensure your clients measure you for what you are worth, rather than what you cost? It starts with clearly communicating your process and the value you deliver and consistently reinforcing it through exceptional client experience. When your process is visible and your service is consistent, clients are far more likely to understand and appreciate your value.

Being fee worthy requires philosophical alignment with your clients. They are not simply buying a product, they are buying into your philosophy, your planning strategy, and your process. This shift moves the relationship from transactional to long term and value driven.

It also requires a more intentional approach to how you run your business. Strengthening client relationships while improving efficiency and productivity allows you to operate with greater focus and discipline. Developing a fee worthy mindset does not just elevate how clients perceive you, it changes how you allocate your time. With money, we think in terms of return on investment. With time, the better metric is return on energy. By focusing your time on the right clients, the right activities, and a clearly defined process, you create a more productive practice and a more valuable client experience.

Be a Financial Advisor, not a Broker: Never Compete on Price

One of the most important qualities of an ideal client is that they appreciate your value and don't question your fees. 

You don't want to compete on price. The core message to instill in your clients or potential clients is this: Brokers will lower their fees to get your business because they are motivated by commissions. You don't negotiate your value because you are a consultant with a process. 

There is a tendency for financial professionals to deviate on their set pricing and fees for fear of losing out on new clients.

When a prospective client says something like "I've met with two of your competitors and they have both offered to lower their fees to get my business," how do you respond?

Especially during anxious economic times, it is easier for a financial advisor to stand out from the "average" pack. Prospective clients spend more time contrasting potential new service providers when things are unsettled, and this is an opportunity to differentiate yourself from others.

Chances are that your competitors will amplify their salesmanship and, in the process, project a high degree of neediness and desperation to prospective clients. A more professional consultative approach where you focus on mutual fit, rather than just making a sale, is far more attractive; especially to more ideal prospective clients.

When a prospective client realizes that you are focused on the lifetime value of a relationship rather than on an immediate commission, you project scarcity and disarm them so that they are more predisposed toward you. It positions you as a superior alternative.

Set Your Rules of Engagement

At the critical moment of truth when someone asks you to lower your fees, you must convey your rules of engagement with an understated calm:

"I hear where you're coming from. Especially in these market conditions we all want to be shrewd in terms of how we invest our money. However, you need to know that I never negotiate my value. You see, someone who is prepared to lower their fees is simply trying to make a sale. They are solely focused on commissions. That isn't my approach. I focus on long-term relationships based on trust and I think that, if price is what's most important to you, you run the risk of overlooking what is much more important in this type of relationship over the long haul. So, I'm probably not the provider for you, because I never negotiate my value."

Do you want to do business with someone who is completely focused on getting something cheap? The relationship is going to last long after you have spent the money you earn on initial fees, and how you start a relationship ultimately impacts how it will unfold over time.

In Review Meetings with existing clients and in Fit Meetings with prospective clients it is essential that you communicate your compensation in a proactive manner. It is on their minds, so take the mystery away by discussing it in a casual yet prepared manner. In the process, you can create an aspirational environment where you outline your service model, and project scarcity because of your approach to providing the highest levels of service to the most deserving clients.

It is amazing how much opportunity can be uncovered by explaining your code-of-conduct and commitment to best practices.

This approach doesn't work every time - but it shouldn't. Not everyone is a good fit for you and you have to be selective in terms of the type of client you strive to attract. When someone knows where you stand, you radiate professionalism and in the process your story becomes easy for a client to tell a friend or family member. People crave consistency and professionalism, and those factors serve as the foundation of referability.

Here's a simple story to illustrate the point of understanding one's value. A homeowner contacted a plumber complaining about some pipes that were rattling in his house. The plumber walked in, quickly surveyed the tangle of pipes, took out a hammer and tapped one specific junction. Sure enough, the rattling stopped. The plumber pulled out his invoice book and wrote out a bill for $500. When the homeowner objected and demanded an explanation of that price for what appeared to be a simple job, the plumber added this to the bill: $20 for hitting pipes, $480 for knowing where to hit.

How you start a relationship will have a big impact on how well it plays out. If a prospective client tells you they are not comfortable empowering you fully, what are your rules of engagement? As one financial advisor we work with put it, when a prospective client says that they are uncomfortable empowering the advisor and putting "all their eggs in one basket", the advisor's rules of engagement are clear: "If you think of me as a basket, it's not a good fit."

If you remember nothing else, remember these three points:

1. Project scarcity so that working with you should provide a feeling of accomplishment for the client
2. Differentiate yourself from your competition with stewardship over salesmanship
3. Understand that what you provide is bought, not sold

MAKE COMPLIANCE YOUR FRIEND: 

Be Compliant for What it Gets You, Not Because You Have To

So how does compliance relate to productivity and Fee-Worthiness? Many financial advisors shudder at the thought of compliance and consider it to be a major hurdle when it comes to client acquisition and business development. We've even heard the compliance department at a certain firm described as the "Sales Prevention Squad".

On the contrary, our experiences have taught us that changing your mindset about compliance is an integral component of business success.

In conversations with financial advisors about the realities of compliance, we like to focus on the benefits the advisors gain, not their obligations. A compliant advisor projects more professionalism through their consistent conduct leading to increased loyalty, empowerment and advocacy, and they also get to sleep soundly at night.

We recently had a conversation with an advisor who had a client make false claims that were startling and a little scary. This advisor used relationship management technology and, fortunately, he followed our process to address the claims during the audit and investigation.

During the audit, the advisor gave the investigator access to his Client Relationship Management solution to review the relationship journal, history and communications track and in short order he was cleared of all accusations. 

In addition to telling our clients to invest every conversation into the bigger relationship - meaning to capture and chronicle everything that is exchanged on a phone call or meeting - we also explain why this crucial information must be archived in a format that is time-stamped and can't be altered or erased. If you can alter your client communication history, you are not compliant, and you are at risk in this hyper-litigious era.

To us, though, this is where being compliant just gets started. Yes, you want to archive all emails, documents and communications in a sequential and searchable format that is easy to access. But you can support that with a panoramic K.Y.C. (Know Your Client) process. We suggest using F.O.R.M (Family, Occupation, Recreation and Money), which we've touched on in nearly all our resources, as an important best practice for financial advisors. As a client relationship unfolds and you uncover, capture and chronicle F.O.R.M information, you create a window into the client's core motivations, philosophy, mindset and much more.

This goes beyond just understanding their risk tolerance, financial goals and overall financial awareness, because you get to know the entire person. The portrait you create of total client engagement reinforces how your wealth management strategy is tailored specifically to that client. It speaks volumes about your overall approach. Furthermore, the F.O.R.M profiling process enables you to develop chemistry and a deeper bond that helps insulate you from factors outside your control, de-commoditizes your services and makes you more referable.

The relationship lasts long after you spend the money you made on the initial fees. So take action and protect yourself. You already know that some people will use you as a lightning rod to channel their frustrations in life. Some people have an aversion to responsibility and find a warped sense of satisfaction in blaming others. Ultimately, some people have a selective memory for specific events that don't unfold as they hoped.

Be compliant in the way you conduct yourself, and be consistent in the type of client you attract and you will have the ultimate S.W.A.N. business - one that serves your life and lets you Sleep Well At Night.

BECOMING A FEE-WORTHY FINANCIAL ADVISOR
 

Master the Art of Articulating Your Value

There is an old saying in marketing, "facts tell, stories sell." This has never been more applicable than today as the commoditization of this industry continues to accelerate. Your value proposition must be interesting and engaging. To achieve that, when you are communicating your value, you must put as much emphasis on you the messenger as you do the message. The services and solutions you provide are the message, but you are the messenger. That's what people lock into, and what differentiates you.

Do your clients fully understand what you do, and do they appreciate your value beyond just rates of return? Do they focus on what you cost them, or on what you are worth to them? Can they describe you in a compelling way to a friend or family member? Have you developed and refined that messaging so that every messenger consistently carries the same message?

A personal branding strategy ensures that prospects can contrast you favorably to their current advisor and ensures that your clients can describe you persuasively. One of the biggest benefits of a personal branding strategy is that it ensures your clients fully and completely understand and appreciate the value you provide for them, which, in turn, helps to insulate them from competitive factors.

Consider the following questions, and how you would answer:

• What do you do?
• Who do you do it for?
• How do you do it?
• Why do you do it?
• How are you unique?

The Reframing Process with Existing Clients

In this era of commoditization, financial advisors come to us asking for help in ensuring their clients focus on what they are worth rather than what they cost. Especially in times of transition, whether of service, ownership or fee-structure.

The most predictable and effective way to execute a transition of any kind with your clients (the example here being the shift from a commission-based compensation model to a fee-based model) is a three-step reframing process. With the need to make systemic transitions, knowing how to not lose clients in a given transition is vital.

Reframing is essentially a process that enables you to communicate three things:

• This is how things used to be 
• This is where we are today
• This is the way things will be going forward

In all existing client relationships, people have a frame of reference defined by how you conduct yourself. Your objective, since change of any kind can stir up fear and uncertainty, is to clearly explain why you are doing it, how you are doing it and what it all means to them. The following reframing process systematically addresses unspoken resistance and smooths the transition for both you and your clients.

Step 1 - The Ramp-up

Preparation is of paramount importance. To start with the vital steps, you will want to identify the following before you launch:

• Master the Model - Completely internalize the platform you are choosing so that you can communicate its merits.
• Identify the Clients - Choose the first wave of clients you will introduce the platform to.
• Write out Scripts - Take the messaging out of your head and put it on paper so you can rehearse and refine it. Get comfortable with the flow.
• Craft the Templates - Create meeting agendas and other visuals, including a Panoramic Client Process (detailing your client service process) as well as a Critical Life Events document that emphasizes how a client's needs evolve as their life progresses.
• Prepare the Tangibles - Create the initial meeting portfolio, the new/updated client Personal Financial Organizer (PFO) that will anchor the client to your new process and platform. Also order high quality thank-you cards and maintain a quantity on hand.

Step 2 - The Launch

Once the Ramp-up is complete, begin the process of reaching out to your best clients to begin the transition process. Here are the steps to deploy:

• Send the Introduction Letter - This plants the seed for your professional evolution and sets the stage for the client.
• Introduction Call - This call books the first meeting to introduce the concept and get the client to begin buying into the process.
• Initial Meeting - This agenda-based meeting introduces and outlines the concept and process of transitioning and sets the stage for the follow-up.

The Launching process is the moment of truth where clients get to contrast for themselves the distinctions between the old and new models (in this case a commission model and fee-based model). Explain the difference between buying investments and buying into a process, and the merits of focusing on the value of advice versus the cost of transactions. You want the client to come to their own conclusions, and that is why no decisions or calls to action occur at this initial meeting.

Step 3 - The Follow-up

After the initial meeting, tell the client that you will follow up in 48 hours to determine if there is a fit. Upon the client's buy-in, inform them that your assistant will call to set up the next meeting and the signing ceremony takes place at that time. Follow these steps:

• Onboard the Client - This agenda-driven meeting officially transitions the client to the platform.
• Present the PFO Welcome Binder - This serves as the hub for the rest of the relationship and includes The Panoramic Client Process document and Critical Life Events document. These tools help future-pace the client, keep them connected to your process, and ensure that they consistently view you as their personal CFO.
• Communicate Your Introduction Process - Position the concept of you as a sounding board for a friend or family member, as a value-added service you provide rather than as a favor you are requesting.
• Send the Thank-you Card - Send a card that has impact and shelf life and pay tribute to the fact that your relationship has deepened. 

Step 4 - REMAIN Fee-Worthy 

You have set a new expectation for the client. It's one thing to succeed in the transition; it's another to maintain it now that the fees are transparent. You have to raise the bar in terms of your proactive and reactive service deliverables going forward. Keep in mind that stress and uncertainty live in the place between expectation and reality. If the service you provide meets or exceeds the expectations you've set, you maintain fee-worthiness, become indispensable to your clients and enhance your refer-ability in the process. This is where a Service Matrix is invaluable - your ongoing client experience.

A Service Matrix can help smooth your route through transitions or troubled times and encourage clients to see you as worthy of your compensation; while ensuring you are investing your time in the clients who generate 80 percent of your income.

If you are like most financial advisors, you have a team of associates and assistants helping you run your business profitably and efficiently. You have strategic planning sessions to kick your own tires and identify untapped opportunities, areas for refinement, miscues and the like. Whether these sessions are held weekly, monthly or quarterly, one of the key points of discussion should be "Do we deserve what we want?" In other words, is the level of service we provide in proportion to what we expect to earn from our client relationships? Having a service matrix helps ensure you are deserving.

In your next team meeting set aside some time to go through the following process to build your Service Matrix; a listing of all the services you provide that identifies which clients receive which services based on their classification, as well as scheduling delivery of those services. For this example, we'll use our AAA system. You may use another (gold, silver, etc.).

A top AAA client will receive every form of service you provide. They deserve it. AA clients will receive every form of service you provide as well because they could be on the verge of AAA status, but a Single-A, B, C or D client will not receive the same level of service.

You can't be all things to all people and time is a finite resource. A Service Matrix ensures you are all things to some people.

Once you have completed this process, be consistent and clear in your execution and communication. You aren't being elitist or disrespectful. You are ensuring that your clients receive the level of service they deserve. Along the way you will earn the right to expect your best clients' loyalty, empowerment and advocacy, and you will remain fee-worthy.

If you want to implement this process alongside Pareto Systems. Contact our team at inquiries@paretosystems.com

Duncan MacPherson

CEO and Founder of Pareto Systems