Why would an existing client agree to a fee uplift without something additional provided in return?
This was in the back of Sarah’s mind as she prepared for an upcoming fee uplift conversation with an existing client.
Last week, adviser Sarah lost an opportunity to uplift a client.
She did, however, gain a lot of confidence in her new approach to increase the fees of her existing clients.
This week, she hoped to build upon that confidence with existing client Anthony.
Anthony’s annual advice fee has remained unchanged since he became a client seven years ago. A healthy widower in his late-50s, who loves his family and work, with no plans to retire. His two grown-up children are living independently with their own partners.
Sarah intends to uplift his fee.
She consulted her colleagues.
One of them recommended she increase, as he does every few years, using an inflationary uplift of, say, somewhere between 5% and 10%.
Anthony’s fee has never changed, so Sarah’s maths suggests the real inflationary uplift over the last 7 years isn’t 5% but closer to 40% which was actually less than what she intended to uplift.
After last week’s conversation with client Adrian, when she clearly witnessed the power of connecting the details of what a client values with her advice, she felt positioning her uplifts on inflation is a cop-out.
The fact that Adrian’s partner did not want to proceed or even meet and discuss what was of deep value to her was a greater testament to the need that every advice fee discussion had to be built upon connections built upon what clients deeply value.
Inflation-based uplifts have little to do with what might be of value to Anthony.
Positioning value on inflation not only diminishes the value of her advice relationship but also positions the price of her advice in relation to something she can’t control – inflation.
Every adviser needs as much control as possible over their pricing. Detailed understandings and agreements with clients on what is of deep value to them provide far greater control over their pricing than inflationary factors.
Another colleague suggested she position the range of expertise the firm can provide to Anthony. The firm has worked hard to build a broad range of expertise for its clients. Having a one-stop financial shop at his disposal is a real asset for him.
Another cop-out.
That isn’t the differentiator Sarah is seeking.
There are many good advice firms offering a similar range of superannuation, investment, insurance, accounting, lending, direct shares, and tax services.
The client benefits from a broad range of services are not in question.
She learned last week that the value of her advice is in what every individual client subjectively values, not the broad range of services that every good comprehensive advice firm can provide.
Other colleagues suggested she consider possibly extending Anthony’s proposition with something new to help position an uplift in fees.
They suggested he could soon need estate planning, or is he considering downsizing from his big family home, or are any grandchildren on the way soon, or what are his plans to support his kids long-term financially, or is now the time for his own pre-retirement planning, or what about his or his late wife’s parents and their aged care plans?
Sarah is quietly confident that if her new approach follows a similar approach to last week’s meeting with Adrian, and the conversation identified raises one of these issues as being of value to him, she will have the basis not just of an uplift, but probably a more significant rescope of the relationship and fees.
TRUST THE PROCESS
She knew what she had to do.
Trust her new process.
She scheduled Anthony’s meeting, planning to introduce the same deep questioning for Anthony’s review, as she had used with Adrian the week before.
She sent Anthony a pre-meeting email, asking for any pressing issues and informing him that she had made slight adjustments to the meeting approach since their last meeting. As a result, he might hear some slightly different questions.
Her email also assured him there would be no additional fees without an agreement on the value of any change in fees.
The meeting, via Zoom, went well.
Like Adrian the week prior, she focused conversations on what Anthony subjectively values.
What does he want to achieve in his life that might require money, or advice, or planning, and what are, if any, specific issues that might arise that could hinder these plans?
Anthony shared his long-term hopes to support his kids financially someday, his hope to be as good a grandfather one day as his own Dad, his desire to continue working until he can no longer, and maybe one day write a book about his upbringing in New Guinea.
The conversation identified nothing specific for the coming twelve months that would require a change to the existing relationship. The same level of service was suitable for maintaining the ongoing management of his insurance, tax, and superannuation.
Once the detailed subjective value was identified, Sarah trusted she had enough to position her ongoing role.
And her intended 50% uplift.
Her positioning was simple.
Re-identifying the detailed value Anthony hopes to achieve provides the clarity and commitment for Sarah and her team to ensure Anthony maximises all his probabilities that his detailed plans, and anything that might influence them, will be managed.
However, to continue their relationship, there will be a 50% uplift of his fees for the coming twelve months.
She said she hopes Anthony will consider this new arrangement, as she and her team want the relationship to continue for years to come. She also said that she totally understands if this new arrangement is not of value to him.
Anthony quietly re-read Sarah’s new Terms of Engagement.
He didn’t say a word.
He then asked the following.
“Sarah, are there going to be more fee increases every year going forward?”
Sarah replied that any future fee, regardless of whether it is uplifted or not, must be of value to you. If our fees are ever not of value to you, we will do everything we can to help you find an alternative advice relationship.
Anthony re-signed the new uplifted Terms of Engagement.
That’s how comprehensive advisers like Sarah increase the fees with existing clients without additional services.
Sarah continues to hold fee uplift conversations with her existing clients. She hasn’t lost another client due to uplifts.
What do you reckon?
Jim
Photo Credit: uplift_shutterstock_1140218402