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Breaking price increases gently

Bryce Sanders

You could always bundle. And why not — airlines do. They sell food instead of serving everyone a meal they might not want. Thus you might provide a basic financial plan as part of the relationship. Are a client’s needs complicated? If so, the basic plan might not be the best, but a more in-depth one, for an additional cost, may be better.

You also need to advise yourself. Will your firm certify you to implement a specific investment strategy on a discretionary basis for your client? If so, there are several investment strategies using ETFs in a fee-based account structure.

You might become the money manager, earning a larger percentage of the fee the client is paying because a money manager is no longer involved. But be aware that by eliminating the middleman, you have taken on additional responsibility and liability. Clients must also understand they are authorising discretionary trading and sign the appropriate paperwork.

It is likely your client pays fees on some assets, but not others. Treasuries might be held at no cost for years. You advise on the entire portfolio. They are benefiting from advice covering many securities, yet paying a fee on a smaller portion of their assets. What percentage are they paying overall? Probably not much.

Costs go up, but clients should understand. The financial advice industry is unique because of transparency and alternatives. Thus establishing a rationale, letting the client know ahead of time and calmly addressing concerns should make the pill easier to swallow.

Bryce Sanders is president of Perceptive Business Solutions, a US financial services consultancy

Five reasons for client pricing increase

■ One approach could be to say that you discounted when the market declined by 50 per cent. It has now recovered and it is time to return to the firm’s published price schedule.

■ When the client pays a fee, the adviser and the firm each get a portion. The client might assume the discount is shared. If the firm requires that they receive a certain amount, the majority of the discount may come from the adviser’s earned portion of the fee. The adviser earns almost nothing. Good clients will not want that.

■ Your client might assume that the firm provides everything you need to do business. They might not understand that you run a business under the umbrella of the firm. If you add new computer equipment, a better client contact system and hire an additional assistant, those are your costs. Your goal is to provide a superior client experience. Because the client benefits directly, it is logical that the costs be passed along.