Do you ever get resistance to the fees you’re trying to charge?
I’m certain that everyone has faced-off with a ‘negotiator’ client more than a few times in their career. What should you do if you’re sitting across the table from one?
- Hang tough and tell them it’s this fee or nothing? (and risk losing some work)
- Negotiate? (which means discounting your fee)
If you negotiate:
- When does it make sense to do so?
- And importantly, when doesn’t it make sense to do so?
And what about these issues?
- Do these ‘negotiator’ clients negotiate with everyone they meet?
- Would they have tried to negotiate you downwards from whatever starting point you set?
- Do you communicate the benefits of your service well enough?
- Are you value for money at the fee levels you want to charge?
Oh my goodness. So many things to consider.
If you ask 20 advisers, you’ll probably get 21 different answers.
It’s a really confusing issue, particularly for less experienced advisers, or those who are not quite sure of their value proposition.
Don’t be bamboozled by any bolshy types who give you their tuppence worth. I guarantee you they felt just like you did somewhere on their journey.
When you’re sitting in front of a ‘negotiator’, you have to have your own thinking crystal clear and that needs to be developed away from the client meeting room. You can’t wing this one in live combat.
The Real Issue
In my experience people negotiate with you when you are not 100% sure of yourself. The minute you get 100% clear, they stop appearing in your life. Or if they do appear, you strike them down before they get very far, because you are absolutely clear on where you add value.
Understanding your own value and being able to demonstrate and communicate it to clients is the key.
I know some advisers try to justify their fees by explaining to clients that they are taking on risk when they take on a client. I hate that approach. Even though it’s true, as a client I’ll be thinking to myself, “if you can’t stand the heat, then get out of the kitchen.” I just won’t understand or appreciate your argument. It sounds like a moan.
Others use the “compliance burden” argument with clients. I hate that too. “Not my problem”, is what I’ll be thinking as you tell me that one.
What are some of the things advisers do that add value to clients?
- Saving them time
- Cutting through any jargon
- Providing a clearer understanding of their choices
- Calculating a financial target they can work towards
- Validating a target that they’ve come up with themselves
- Providing an expert second opinion
- Keeping them on track and aligned with their real life goals
- Removing the emotional pain or fear about a financial decision
- Or helping them manage their emotional baggage around money
It’s a pretty decent list.
But you do more than that. You add value to people in cold hard cash, too.
And it’s showing clients these cash wins that makes it easier for them to see and understand your value, before they come to understand your true worth, which is providing certainty and peace of mind.
Knowing how and where you add value definitely helps with the negotiators.
So in a lot of cases, rather than negotiate, you’ll want to ensure you ‘show’ clients how you add value in cash. That might be built into your client engagement process, via the use of case studies, or stories that you tell along the journey.
Defence Against The Dark Arts
The best defence against the ‘negotiators’ is to be asking great questions at your very first meeting with a new prospective client. Asking great questions allows the client to discover for themselves what the big issues are that they face. Rather than you telling them, they sort of work out that they don’t have a pension problem, or an investment problem, they have a “How much is enough problem”, or a “Will my money last as long as I do” problem.
The person who gives them that realisation is hugely valuable. It’s then far less likely that they’ll be haggling over fees.
When Should You Consider Discounting?
Believe it or not, there is a time and a place to consider agreeing to a discount.
One of the characteristics of selling a service, is that you can’t store inventory.
If I sell widgets, I can make the same number of widgets in my factory every week (regardless of demand) and store them up now, because I might sell more at Christmas time. I can manage fluctuating demand by accumulating stock or running down my stored inventory if demand increases.
In a service business, like Financial Planning, you can’t store stock. If you are not busy this week, you’ve lost that production forever. Because of that fact, discounting can make sense as a strategy.
So if your negotiating client is giving you a hard time while you’ve got five other large, well paying jobs in the pipeline, you don’t discount.
But if they are your only job in the pipeline and the difference between securing them or not is discounting a bit, I might decide to do it. At least that way I haven’t wasted this week’s capacity.
Discounting Is Not A Long-Term Strategy For Success
Clearly, this is only true in the short term. If you find yourself discounting all the time, you are going to pay long-term consequences in your net profit margins (refer to my blog Financial Planning By Numbers). However, if it only happens sometimes, on some jobs, I wouldn’t be overly worried.
Large jobs do sometimes warrant a discount from your standard pricing, because at the end of the day you’ve only got to get paid ‘enough’. If the job is big enough, and I still think I’m going to get paid enough, I might accept a discounted price if I felt it was the difference between getting the job and losing the job.
If I secure a client today at a discount, I can always go back in 2 or 3 years and try again to fix the fee level. In 3 years I’ll know more, have more skills, and might have so many new clients that I actually don’t care if they accept or reject my offer. That is, I’m in a stronger position financially than I was 3 years ago.
On the flipside, some jobs paying larger headline fees can also demand a lot of you and your team’s time, and not be profitable at all. So be careful pricing these.
As I’m sure you’ve worked out for yourself by now, a lot of these decisions on pricing and negotiation are going to be firm and situation-specific. What’s the right decision for one firm, may be totally wrong for another.
If you can be clear on where and how you add value to clients, you’ll find the ‘negotiators’ become a non-issue for you and your business.
Let me know how you go.
If you’re looking to discover where and how you add value, and you’d like to quantify it in cash terms for clients, it’s all sitting there in my Uncover Your Business Potential Online membership community.
Ready to view.
It can help you solve one of the biggest challenges in a Financial Planning business.
The video module takes a deep dive into where advisers add value, and most importantly, how you can demonstrate it to your clients.
There’s a downloadable tool to help you pull out your value from the work you’ve done for your clients in the past.
I’ve cut to the very core of what makes your service high-value.
The ‘value thing’ is at the core of most adviser angst.
When you worry about your pricing? You’re really worried about your value.
When you experience imposter syndrome? You’re really worried about your value.
When you think “I’m not as good as the firms I see on the cover of New Model Adviser” Ok, I’m kidding. No one worries about that. But if you did, it’s really concern about your value.
So I’ve dealt with it, once and for all.
All this for just £149 per month (which includes your VAT already).
Oh, and I’ve also addressed the other iddy biddy issue of How To Create A Killer Ongoing Review Service. That ties in very closely with your value, so you can check out both videos at the same time, if you like.
If you can solve the ‘value’ issue in your business and your mind once and for all, what’s that worth to you?
Tens of thousands of pounds I imagine.
Come join me and an amazing community of Financial Planners who are going places.
All you’ve got to lose is your smoker’s cough (as my Grandma used to say).
Knowing how and where you add value definitely helps with the negotiators.
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