In today’s price-conscious world, most of us are negotiating tougher deals when we make major purchases. But regrettably, we’re not alone in putting more focus on getting value for the dollars we spend. Our clients are doing the same thing.

In the world of investment dealers, these conversations about price have been around for some time as a result of discount brokerages and negotiated commissions. But, now, advisors, whose compensation has historically been embedded in products such as mutual funds, report they, too, are having more frequent conversations with clients about how these advisors are compensated.

Although these conversations may still be at a fairly low level, they are becoming more common and can be expected to increase in the future. That’s especially true for advisors targeting $1 million-plus accounts. There is stiff competition at the top of the market from investment counsellors and much greater awareness among those clients about the going rate for investment management.

There are four strategies to consider when talking to clients about pricing for the services you provide:

> Discuss The Benefits Of Your Services.

Start with the benefits and value you provide, not the price. Never begin a conversation with price. The biggest part of the conversation should relate to the benefits the client will receive by working with you.

For this to be effective, you need to stay away from generalities such as “high-quality advice,” “personalized solutions” and “regular contact.” Instead, you need to articulate your value in concrete terms — the more tangible and specific, the better.

If a prospective client asks what you charge early on in the conversation, you can respond by saying that you’d be happy to talk about your fees. But before you can do that, you need to ask some questions, in order to get a better understanding of the client’s needs.

We all learned in Sales 101 that we need to translate features of the work we do into clear benefits for clients. For instance, creating a financial plan is a service on which clients can put a price because there is a clear benefit: they gain peace of mind and a sense of control as a result of the plan. The value, then, is considered to be immense and difficult to measure.

> Tailor Your Value To Client Needs.

The most successful advisors have segmented their clients by the value the clients provide to the advisors’ businesses; in turn, the advisors then deliver higher levels of service and communication to their top clients than the advisors provide to the lower levels.

Although that’s a good start, you can still get trapped into ignoring client preferences in the benefit bundle you deliver. Treating all “A-level” clients the same way means that some of the things you do will be of little or no relevance to some of those clients. The only way to get the maximum value for the services you provide is to tailor those services to each individual client.

So, start by segmenting clients according to their hot buttons. Here are 10 ways in which clients might perceive value above and beyond the quality of advice and returns you provide:

1. Make clients feel that they are in control of their future by putting a financial plan in place that charts their path to retirement; provide regular updates along the way.

2. Provide reassurance by holding in-depth meetings to review clients’ portfolios a couple of times a year.

3. Given that you work with similar clients, provide specialized expertise and bring specific skills and knowledge to the table.

4. Give your clients peace of mind through more frequent, shorter phone calls to discuss market developments and address any anxieties they may have about their investments.

5. Ensure clients are informed via weekly or monthly e-mail updates and commentaries on the markets.

6. Help clients improve their understanding of market developments through invitations to quarterly luncheon workshops.

7. Ensure that clients receive highly responsive service. So, for your very best clients, this might be an immediate “drop everything” response when they call.

8. Provide examples in which you’ve helped clients reduce taxes, thereby demonstrating how you can help them pay less taxes.

9. Let clients know you care by providing unpaid services above and beyond, such as introducing clients to professionals who can help your clients in other aspects of their financial lives.

@page_break@10. Make clients feel valued via “feel good” lunches, dinners or social outings in which you build bonds, communicate the value you place on the relationship and ensure each client feels important.

It’s unlikely that all 10 of these are important to any one client; even if they were, it’s just as unlikely that you could afford to deliver on them all, unless the client was a very big one.

To deliver true value to each client, you have to pick and choose what is meaningful to that client. In essence, you have to identify which two, three or four services are most relevant to each individual with whom you deal and focus on those services in your interactions, especially with your top clients.

Consider taking this one step further: put the benefits you provide on a spreadsheet, ranking their importance to key clients.

You may not be able to do this for every client but, at the very least, you need to do this for your top clients. As an aside, if you’re not sure what clients find of value, there’s no substitute for asking them the next time you meet. Also consider asking the following question: “What one or two things could I do to have you feel that you’re getting more value from our work together?”

> Position Yourself As A Premium Provider.

Once you’ve established the exact dimensions of the value you provide, the next step is to talk about your pricing — and to be absolutely unapologetic about charging a premium. If clients or prospects say that your fees seem high or they can get what you offer elsewhere for less, respond by agreeing.

Don’t be afraid to say that your philosophy is to provide a premium level of advice and service for clients who find that appealing; the key is to have demonstrated clear value before introducing the subject of pricing.

> Be Willing To Lose The Odd Client.

There’s a simple truth to pricing: if you never lose a client on price, you aren’t charging enough. As painful as it is to lose a client on price, the cost of being a premium provider is that you lose clients who aren’t interested in paying that premium. Consider telling clients who balk at your pricing that if getting the lowest price is their priority, you are happy to refer them to a number of advisors who do not charge the premium you do.

Research shows that Canadians fall into two categories: in one camp are those to whom getting the best possible price is the paramount consideration on virtually everything they buy; in the other are those willing to pay a premium for important purchases, provided they truly believe they’re receiving superior advice and value.

As you think about pricing your services, consider implementing a plan using these four strategies — they will allow you to thrive in a price-driven world. IE



Dan Richards is president of Strategic Imperatives Ltd. in Toronto. For other columns and to access Dan’s blog, go to
www.investmentexecutive.com.