The financial advice industry is different. Pricing is more transparent, as clients see what they are paying in fees and commissions. The trend is for the consumer to understand what they are paying, receiving and that they are not overpaying .
Furthermore, your product or service is not unique. Investors can buy similar or the exact same product from several competitors on the high street. The ability to trade online almost for free has forced advisers to offer aggressive discounting to win business.
What about the issue of performance? Would clients not willingly pay more to get a better return? Over time, many mutual funds and managers underperform their benchmark because their performance must cover costs to stay even and ETFs become an attractive alternative. Manager performance tends to revert to the mean over time, unless the adviser has great money managers available.
As an experienced adviser you have a great advantage: your personal relationship with clients. You understand their aspirations and the challenges making each situation unique. You have also helped them through difficult markets, advising them not to sell when things looked bleak and encouraging them to invest as the economy improved. You have proved yourself, which has great value.
Many advisers discounted fees and commissions during the difficult years to share the client’s pain, while others discounted to win the business. Advisers proved themselves, yet the discounts remained. Well, you can raise prices by removing discounts.
No client wants a price increase, but they will accept one if they understand the rationale or gain a benefit they value. The rationale must first make sense and there are particular reasons why client pricing ought to increase.
Many businesses announce increases in small print, which few clients read. Then one day these clients open their bill and are presented with the increased prices. These businesses often get away with this because there are few alternative providers and changing firms can be tedious. But never forget that your clients can easily vote with their feet, so tread carefully.
However, there are ways to communicate with your client about price increases that will diffuse any potential animosity.
Once you have sent your clients a letter informing them about price increases, they will not be happy and it is likely that they will immediately telephone you.
First of all, keep your cool with irate clients and present a rational case for the increases. If after this they are still angry and make it clear that they do not want to pay more, then you simply have to draw a line in the sand.
You will need to discuss any discounts they already have and explain that discount reduction will apply to new assets added to the account. However, assets they bring in before then will be priced under the old structure. Let them know that the policy will take effect in three months.
If they use professional money management, it is likely that fees are tiered with breakpoints. In discussing the removal of discounting, also talk about the benefit of adding assets to cross a breakpoint and pay lower fees across the entire amount.