The financial services world has undergone significant change in the last few years, mainly for the benefit of those seeking financial advice. They have more options, investment costs are decreasing, and they have more protections thanks to the regulators. However, for financial advisors, the more things change, the more they seem to stay the same—at least as it relates to fees. Advisors still find themselves in the unenviable position of having to withstand fee compression while, at the same time, justifying them to their clients.
Stop justifying and start explaining
First, let’s eliminate the word “justify” from our vocabulary. Do doctors have to justify their costs? Next to the family doctor, financial advisors are one of the most influential people in their clients’ lives. You are the only professional who can safeguard their financial futures. Your profession requires a body of knowledge as extensive as any—except perhaps the medical profession. You are worth every penny you earn, and you should never apologize for it.
With that said, advisors still must be able to explain how they charge clients and why it’s to their benefit to pay it. Clients expect to pay for solid financial advice, but in today’s highly competitive advisory landscape, they also expect to receive the value they might not get from another advisor. The more added value you offer, the more your fees will seem like a good deal.
Said differently, fees only become objectionable when there is an absence of value. To explain fees, you must be able to explain the value you add. The challenge for advisors is that “value” is perceived differently from one person to the next. It’s the advisor’s job to gain an understanding of what constitutes value for a prospective client.
What are they comparing it to?
If your prospect questions your fees, they may be comparing them to another advisor or advisory option, such as a robo-advisor. You need to understand how they perceived that experience and what value they felt they received.
Did they have a negative experience with another advisor? Did they not understand how they were being charged? What value do they feel they received for the fees they paid? Do they view fees as an expense against their cash flow or an investment into their future? Having this conversation allows you to set the fee discussion aside for the moment as you turn the subject to the value they can expect to receive from you.
Placing the fee-value conversation in context
When explaining how you charge clients, it’s critical to do so in the context of what’s meaningful to your prospect. The only way to do that is by thoroughly understanding their circumstances, concerns, and life aspirations, allowing you to paint a vivid picture of what they want to achieve.
When you can relate your fees to what is meaningful to them and align them with the problems they’re trying to solve and how you’ll help them overcome any obstacles, they are more likely to perceive it as an investment in their future. When you place the fee-value conversation in that context, you can ask them, “What’s that worth to you?”
It all hinges on your first meeting soft skills
That is why the first meeting conversation is crucial, applying critical selling habits like focusing on making a personal connection and building a relationship. Your most powerful tool is active listening—asking thought-provoking questions and allowing your prospect to do most of the talking while looking for opportunities to display genuine empathy.
Chances are, they have never been asked such probing questions, and it’s very likely no one has really listened. When your prospect experiences that, your value becomes clear. The process becomes collaborative. And they begin to trust you. What is that worth?
Related: The Crucial Working Habits Advisors Must Master To Be Successful