Do Full Service Advisors Deserve Commensurate Compensation?
There’s probably precious little a Financial Advisor can offer that you aren’t offering. Some Advisors do taxes and some do not, but basically we all generate revenue the same way. We offer the same products and the same process at essentially the same price. It’s hard to charge more than the other guy if you are both doing the same thing.
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At some point we want to raise our fees,
but there is always that fear factor due to the elasticity built into a Financial Advisor’s revenue stream.
Increasing our fees does have a price effect. After our fees go up, what we do sells for a higher price, which raises our revenue.
However, there is also a quantity effect. We may do less business because of our higher fees, lowering our revenue.
The safe place, of course, is the middle of the road.
Don’t raise your fees. If we charge three quarters of one percent to manage assets, we can’t be far off the competition. They can’t use cost as a means of stealing our clients. We’re better off not being the nail that sticks up. We don’t dare be too far out of line.
Don’t be intimidated by that last thought. Break the fee inertia.
Charge what you know in your heart you are worth, especially if you feel your fees are low.
But I caution you. It’s hard to justify increased fees in a me-too thinking kind of world. If you want full compensation for full service, get into a one-of-a-kind thinking world.
Every consumer asks himself the same question. How much am I willing to pay if I really want this? If your clients rank a visit to your office just like a visit to their accountant’s office, of course they don’t appreciate the experience and aren’t willing to pay top dollar. Why pay Four Seasons prices when you can get a nice bed, a hot shower and a flat screen TV at a Holiday Inn?
Just imagine the discussions before the first Four Seasons opened its doors. “Average hotels are charging $100 per night. Good hotels are charging $250 per night. We are going to charge $700 per night. How are we going to justify that?”
Think of the Four Seasons amenities like you think of the food at a five-star restaurant. People don’t go to a five-star restaurant solely for the food. They go for the experience that comes with the food.
If you’ve ever had the pleasure of checking into a Four Seasons, you know what it’s like to have every employee focus on you like you are the only customer in the world. Four Seasons employees don’t multi-task. They focus. That singular dedication is the very personification of great service. When I am talking to you, you are the only person in the universe.
Walk into the office of any Advisor in the world who has been skilled enough to raise $500 million or $1 billion in assets and you’ll get a Four Seasons buzz.
I urge you to raise your fees only if the experience of doing business with you is worth the money.
Making less than you are worth doesn’t mean you can work any less. Clients want great service, no matter what they pay. In fact, every consumer in the world wants the best product and the best service at the lowest price possible. That perfect world doesn’t exist.
Years ago, I saw a sign in the window of a print shop in Iowa. I’ve never forgotten that sign. “Fast. Good. Cheap. Pick two.”
There is a happy medium to pricing.
If you feel you are an average Advisor, charge average fees. But don’t think you are scooping the competition by undercharging your clients. If you are giving your clients the benefit of a discount, I assure you they don’t know it. Chances are you are costing yourself a lot of income and your clients aren’t necessarily appreciative.
Since we’re all offering the same products and the same process, what distinguishes a person of unique value in a commoditized world?
In a nutshell, exceptional service.
And attention to detail.
Make a visit to your office an experience so phenomenal that people tell their friends about it. Make dealing with you worth the price.
I talk a lot about my friend Mike, as successful a Toyota salesman as there is in America. Mike sums it up quite nicely. “Good cars ain’t cheap and cheap cars ain’t good.”
The very definition of full service is service that leaves nothing undone.
If you are indeed a full service Advisor, you deserve commensurate compensation. There is no need to let timidity or false perception keep you down if you are, indeed, worth every penny.