Financial Advisor Fees with Transparency and Clarity: A Better Way to Communicate Value
The world of financial planning can be overwhelming, especially when it comes to understanding fees and how planners are compensated. Advisors often use industry jargon that may leave consumers confused. Terms such as fee-only, fee-based, flat fee, retainer, subscription-based, percent of AUM (what is AUM?), CFP® credentials, and fiduciary are just a few examples. But what does this really mean for the consumer? How are you being compensated, and what is involved in those fees? Here are some tips for breaking down your fee structure in plain language.
Understand your desired business model and ideal client
Different advisors serve different people differently. Consider these three factors:
Who do you serve? Consider the details of your ideal client, such as their marital status, number of children, and income. Why did you choose this specific client?
How do you serve them? Think about your financial planning process. Do you provide a quick second opinion or an ongoing relationship with accountability? How often will you meet and for how long? What is the best format for your client – in-person, virtual, or over the phone?
What is the most appropriate way for your ideal client to pay for your service?
Once you have gone through this exercise, you can align your business more closely with your target clientele. Check out my example client profile here.
Things to consider if you are looking to manage investments for your clients
Is financial planning a prerequisite for investing with you?
Why would someone choose to invest with you over doing it themselves? They may not have the time, temperament, or talent.
Is there a minimum asset or portfolio size needed?
What is the billing cycle, and how often is the fee pulled? Be specific about where assets are held and how often the fee is pulled. What does this fee cover?
If your clients manage investments themselves, what support will you provide?
If you are offering financial planning, things to consider include:
What does the relationship look like?
How often will you meet, and how will you offer education?
How will you hold clients accountable to execute on recommendations?
How will you help clarify what's important to them?
Will you offer a proposal? If so, what's included in it?
What are the fees, and when are payments due? What does the fee include?
What's the duration of the engagement?
All of this prep work should be done and finalized before moving on to the next part.
The following step is to design a visually attractive and straightforward table that clients can easily comprehend before reaching out to you. This table can be used on your website, handouts, employee onboarding, etc. This will enable your clients and internal team to understand your fee structure more effectively. Financial planning is for everybody, so it should be understandable for everybody.
It's essential to separate your financial planning fee from your investment balance. Often, the two are not correlated, and many people prefer to outsource their portfolio to their financial planner or manage it themselves.
Consider making a video that explains your payment structure. Here are some questions to address:
What are the different ways in which you can be paid?
Which fee type is best suited for each client?
What is included in the fee?
Do you offer a free discovery meeting to assess compatibility?
Who do you typically work with?
What do the acronyms you use stand for? (e.g. fee-only, AUM, fiduciary)
Other important considerations for your website include:
Linking common questions back to the fees page and into your FAQs.
Providing a detailed financial planning process and explaining what's involved in becoming a client.
Reiterating your values and philosophies.
Everyone wants to know precisely what they are paying for and what they are getting in return. Ensure that your pricing is straightforward, with no surprises, hidden commissions, or fees. The cost should align with what the client is receiving.
Take the next step
Let’s work together to create a custom fee table and video that showcases your value to potential clients. This service starts at $500.
We'll have an initial call to discuss your firm, ideal client, and fee structure so I can fully understand and get a sense of your business and vision.
We can approach this project in one of two ways:
I can provide question prompts for you to answer that we record together and then I edit
Alternatively, I can give you the questions in advance, you can record your answers, and then send me the file for video editing.
If you’d like to discuss further or are looking for an abbreviated version of the package, don’t hesitate to reach out!