Maybe we are getting ahead of ourselves with this topic. With an increase in interest rates and rising inflation, it is possible fees charged to clients might be going up too. Here are a few pointers.
1. Do: Be the one who initiates the conversation. A change to the client fee schedule is rolled out along with a change to advisor compensation. The firm often uses both to channel behavior. Look at the big picture, where the firm is trying to go. Now call the client.
2. Don’t: Assume clients won’t notice. It is tempting to “Let sleeping dogs lie.” The change in client fees will be talked about in newspapers, cable TV financial news, websites, blogs and on social media. If you don’t get in touch first and outline reasons, someone else will do it for you. Maybe even a competitor.
3. Do: Know and defend the reasons. The firm has likely invested a lot of money in new systems. The technology is much better. Clients can access data in real time. The technology may now be portable, making at home portfolio review easier. How is the money the firm is collecting (and spending) benefiting the client?
4. Don’t: Blame the firm. It’s easy to get into a “them” and “us” mentality. Yes, you want to side with the client because you are representing their interests, but your paycheck comes from the firm. Clients value loyalty. You do not want to imply you will throw someone under the bus once something inconvenient happens. Your client considers you an extension of the firm.
5. Do: Review your past history. If you have a long-standing relationship, you have done a lot to make your client’s life easier. A major part might involve handholding, but so is keeping in touch, letting them know you are on top of things. You may have helped them get access to cash when they were in a foreign country or anticipated problems. Recap the high points in your relationship.
6. Don’t: Immediately offer to discount. This implies you are scared the client will bolt. They only see you as providing a service for a fee and the balance is precarious. You do a lot more for them, but sometimes people have short memories. Remind them.
7. Do: Segment the increases. Your client does business across several product areas. Fees might have risen on individual stock transactions, but not on managed money or buying bonds. Let them know some product or services may have increased fees, but others have stayed the same.
8. Don’t: Assume it’s an across the board increase. Your client might morph “fee increases” into raising the cost of the entire relationship. If that’s not the case, let them know fee increases are localized.
9. Do: Show clients how they can save money. Fees might be increasing, but there should still be breakpoints in managed money, fee-based accounts and mutual fund purchases. Let them know fees can remain the same (or decrease) if they bring more assets into the firm.