Why Charging Fees Is Better

no hidden feesIn this post I am going to discuss why charging fees for your financial planning advice is better than solely receiving compensation that is embedded within the products you are selling.

Charging fees will put you in a class on your own.  You will differentiate yourself from pure product salespeople.  When you provide financial planning and advisory services and charge for them, people will perceive you as a professional and are more likely to take your advice.

Your income will increase in two ways.  First, you receive fees for the work performed which in itself is going to increase your revenue.  No more giving away your advice for free.  Second, because of the added value in your services (and I’ll touch on where that added value comes from in another post) your implementation rates will increase.  Clients will implement more of your ideas and recommendations.  Why will they implement more of your ideas?  Because the recommendations are based on the clients objectives, not yours.  Doing the planning first (and charging for it) will automatically make your recommendations more in line with exactly what the client needs to do to accomplish their goals and objectives.  In other words, you as the planner will do a better job.

Can you imaging what your plan would look like if you actually charged a fee for it?  I tell you one thing, it will look a lot different that what it does right now.

When we first started charging fees, we worried that people would bock at the idea of paying for the financial planning advice because there were so many advisor’s giving away a “free” financial plan.  However, I am here to tell you that what you and I know about the “free” financial plans is also known by most consumers.  You get what you pay for.  Our experience was that once we started charging for the plans, our implementation rates went through the roof, our referrals from clients increased and the respect we got from other professionals was huge.

But, here is the big problem.  In order to achieve success in selling fees to your clients, you must have a true system.  Without a true system, you are dead in the water.  This system will provide you with the freedom and peace of mind to know that you won’t accidentally charge two friends two different fees (and risk them finding out about it).  This system will provide you and your office a track to run on for developing proper office work flow procedures to ensure nothing falls through the cracks.

Developing a predetermined fee schedule, with supporting documentation, will eliminate the “off the cuff” approach that most advisors seem to be using.  This “off the cuff” approach will simply motivate clients to try to negotiate their fee with you.  NEVER do this.  We never stray from our fee schedule.  If clients don’t like the fee, they can try to obtain the same level of service and strategy from some other firm.  We are professionals, not car salespeople!

This brings me to a very important point.  Quite often I will see financial planners use an “offset” method for charging fees if clients implement the plan with the planner.  NEVER EVER DO THIS!  Think about it.  Could you imagine if a surgeon said to you that they would reimburse you their diagnosis fee if you let them perform the surgery?  Can you say “Second Opinion…”.

These are simply two separate issues.  The fees are for the work.  Not the implementation.  The implementation has to be done somewhere and they can either elect to a) do it themselves, b) use someone else to implement the recommendations for them or c) use the person who already knows everything about their situation who they already have trust and faith in to implement the plan.  Which do you think they will choose?

If you are not charging fees, you need to start – today!  Develop a fee schedule and stick to it.  What’s the worse thing that can happen?

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