OpinionApr 10 2013

Clients will question value for money of advice fees

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In the past I may have said that I do not have a problem getting clients to pay fees. It is a dismissive response to people whose argument is solely that fees present nothing but problems. Clearly these are views at opposite ends of the spectrum, whereas the reality is we sit somewhere between the two.

The fact is I have been charging fees for several years and along the way have won some and lost some. With practice I have got better, and now feel I am probably charging the right fee for the job. But I do not think my clients really enjoy paying fees, as a recent conversation shows.

The client has been working with us for almost three years, and has never been entirely happy with the fees. He loves the work we do, and never fails to say so, but cannot reconcile that with the fees he pays. On each occasion we present a bill it is simply another opportunity to negotiate and seek justification for the amount.

On the last occasion I figured it was no longer worth trying to keep a client who did not value our services as much as he said. We (the team) had reached the end of our patience and any ‘goodwill’ had been exhausted. I wrote suggesting maybe we were not the right firm for him, and we would not be offended if he wanted to take his business elsewhere. He asked for a meeting to discuss.

The problem, he explained, was not that we charge fees, but that he has no idea whether they represent value for money. Although he appreciates the work we do, providing him and his wife peace of mind, he has no idea whether this really is value for money. I am sure there are some of you now saying that price is immaterial if the client perceives value, but that is simplifying the position somewhat.

I am sure that though my clients all say they appreciate the work we do, they would feel more comfortable if they got the same service for less money. Low interest rates, rising inflation, and constant economic doom and gloom, mean clients are increasingly fearful. Presented with bills for advice and services that they may have previously thought were free is making them nervous.

I am sure that though my clients all say they appreciate the work we do, they would feel more comfortable if they got the same service for less money

And that ignores other pressures our clients come under. When I met with my client he told me he had recently suffered a series of disasters. His wife was diagnosed with cancer, then he had an operation, and finally his elderly mother suffered a stroke. He admitted that more than ever he needed our services, but the constant reminder of what it cost undermined the value.

His reference point is the Bank of England base rate, and my fees alongside other fees paid by his investment portfolio, feel unsustainable by comparison. Only hindsight will prove whether he is right or wrong, in the meantime he only has my word.

Dennis Hall is managing director of Yellowtail Financial Planning