Pershing

Transitioning to Fee-Based Business: Establishing Your Client Value Proposition

Issue 7 - June 2009

In our continuing series on transitioning to a fee-based advice model, we would like to address one of the greatest stumbling blocks for investment professionals converting to fees: establishing the proper value for their services and expanding that value proposition to meet client needs.

Many investment professionals find that this step is one of the most difficult. They worry that they will lose clients and/or become involved in extended conversations about fees, or even have to apologize for the fees they charge. Keep in mind: price is only an issue in the absence of value. Clients are unlikely to question the fees they pay if the investment professional is clear about how they help the client achieve their objectives.

Whether you have a practice that is 100% based on fees, a mix of commission and fee business, or are solely commission based, you should be prepared to present a transparent schedule of fees with your clients.

When discussing your fee structure with your clients, you should start the conversation by outlining your services and providing examples as to standard fees in the industry, when commissions would be appropriate, etc.

Most important: have confidence in the value you deliver. The best way for you to gain confidence in communicating your fees is to hone your value proposition: the practical statement of how you positively impact the lives of your clients. Take stock of all of the advice services you provide to clients. Do not assume that the biggest impact you have is through asset management services, since clients often “expect” that from their investment professional.

What they truly appreciate—and what you must emphasize—are your “value-added” services, such as counseling a client responsible for settling the estate of a parent who has passed away, providing their children with an education on money and investing, and answering questions about which mortgage might be best suited for them. These types of services, which you as an investment professional may be delivering, but taking for granted, are not taken for granted by clients.

Consider all of these services in determining your value proposition, and make it clear to clients that their fees provide them access to a broad range of support to help them address expected, as well as unexpected, events in their lives.

For more information about these and other aspects of transitioning to a fee-based practice, we encourage you to review our new guidebook, Transitioning to Fees: An Investment Professional’s Guide

For Professional Use Only.