The conventional wisdom amongst financial advisors is that the best place to talk about advisory fees and minimums is face-to-face with prospective clients, who are told “Come in for an introductory meeting and ‘we’ll talk’ about the cost to work together.” Doing so allows the financial advisor the opportunity to explain the nature of what he/she does, and the value of their services, to provide better context regarding their costs. And, if necessary, allows the advisor to make an on-the-spot decision about whether to grant a prospective client an exception when it comes to their fees or minimums. Except as it turns out, that also may be the biggest drawback to waiting until the first prospect meeting to discuss advisory fees and minimums, and can actually put us in situations where we make ‘business’ decisions we ultimately regret!
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at why it is important to put your advisory firm fees and minimums on your website up front, including why it makes you more referable, helps screen out non-qualified prospects, and can protect us from ourselves when it comes to making fee and minimum concessions just to get (bad-fit) clients!
The first issue with not publishing your advisory fees and minimums, though, is simply what it communicates to the client. After all, the RIA that doesn’t publish their fee schedule online is effectively saying: “We believe in fiduciary transparency. That’s why we won’t tell up front what we charge.” And the reality is that, when it comes to RIAs in particular, our fees are already publicly available through the SEC’s Investment Adviser Public Disclosure website anyway! Which makes advisory firms seems as though they have something they’re trying to hide by making already-required-to-be-public fee schedules and minimums difficult for prospects to find. And to make matters even worse, not putting your fees and minimums on your website makes it hard for other people to refer to you, as there’s nothing more embarrassing for a referrer than sending someone to you, only to have you reject them. As a result, referrers are tempted not to refer, because it’s safe to not refer to you than it is to refer and risk creating an awkward social situation if their referral doesn’t meet your minimums or can’t afford your fees!
Another important consideration is how listing your fees and minimums allows your website to screen out non-qualified prospects. And this is valuable for advisors, because one of the most wasteful things you can do, from a business development perspective, is to spend a lot of time meeting with prospects who aren’t actually qualified to do business with you. When prospective clients can see what you cost and what your minimums are, if it’s not a good fit for them, they’ll just move on. Perhaps every now and then you’ll miss out on a prospect you might have converted and convinced you were valuable enough and worth paying for if you met in person. But you’ll also save a lot of wasted meetings with people who were, realistically, never going to do business with you.
Perhaps most important, though, is the simple fact that as a helping profession, most financial planners want to help people. Which means it can be especially hard to tell someone “no” to their face in a meeting, leading to the temptation to discount fees, reduce minimums, or make other on-the-spot concessions. And even for otherwise qualified clients, it’s difficult in the moment to stand firm on your advisory fees if a prospective client questions them the first time they hear about the fee. But when advisory fees and minimums are disclosed on your website, prospects know the details up front – and if it’s not a good fit, they likely won’t contact you in the first place. Which reduces the risk that you put yourself in the awkward position where you make bad business concessions to a prospect simply because it felt too awkward to reject them (even if it would have been a good business decision to do so!).
Because in the end, actually putting fees on your website is not that hard. Just write “Our fee schedule is <blank>. The minimum to work with us is <ZZZ> of assets.” If you are concerned about the possibility that you might take a client with only $300,000 who was in their 40s, then go ahead and just write something like “Our minimums are $500,000 of investable assets. However, our services are also available to active accumulators under the age of 45 with only a $300,000 minimum.” In other words, if you have rules about how you decide which clients to take, or not, simply disclose it, and let prospective clients choose!
The bottom line, though, is simply to recognize that putting your advisory fees and minimums on your website is good business. Both because it helps to fulfill your brand promise of being a real fiduciary. And because it makes it easier to refer to you. But most of all, because it helps to screen out non-qualified prospects, so you don’t meet with them when you shouldn’t. Which at best wastes your time. And it worst puts you in a position where you can’t help yourself and allow your fees and minimums to be haggled down. Which is not good for your business in the long run!