WHAT ARE YOU WORTH?

Have you had anyone ask you lately about your fees, and either directly or indirectly, ask you if you are "worth it"?   

I have been hearing from advisors that clients are starting to ask more about fees and value.  It's not surprising that in uncertain times that clients want to know that they are making a smart decision in paying for an advisor. 

It is our job to be prepared to answer that question with grace.   And in answering it for our clients, we might also remind ourselves of the quantifiable value we bring to our clients. 

We need to start with our emotional reaction to the question itself.  If a client asks you, "How much am I paying in fees?"  What is your gut reaction? 

Do you get indignant?  Do you get defensive?  Do you get uncertain? 

We cannot answer this question with grace if we see the question itself as an insult to our self-worth.  We need to commit to an understanding, an agreement, that it is a reasonable question to ask. 

If you were paying someone $2,000 for a service, would it be fair to ask what exactly you are getting in return?  What if you were paying $5,000 or $10,000 per YEAR!?  Would it be reasonable for you to ask that question? 

I don't think it is just reasonable, it is financially responsible for our clients to be asking that question. 

And WHY are they asking that question?  There is a solid likelihood that someone told them they are dumb for paying for an advisor.  It might be a friend.  It might be the media.  It might be their colleague rattles off financial "advice" at the water cooler at work.  

They don't want to feel stupid.  They are most likely asking you, not so they can fire you, but so that they can feel justified in paying for the services and relationship that they enjoy.  

So, can we agree that when someone asks you this question, your response should be, "Great question!  I am so glad you asked!" 

Now that we have the emotional response out of the way, let's talk about your value in an objective way. 

In the: 

Putting a value on your value: quantifying Vanguard's Advisor Alpha white paper, researchers make the case that working with a competent financial advisor is worth about 3% in net return.  With results varying by client and advisor.   

If you have the Morningstar Value of Advice report at your fingertips, you would see that their research found that “sound financial planning decisions can generate 29% more income on average for a retiree.” 

How about this one from AthenaInvest?  In one simple visual, it shows the impact of having and following a financial plan has on an investor’s net worth.  

I would encourage you to have a file (paper or electronic) where you keep these types of resources.  When the question comes up, pull them out and reference the findings in your conversation about fees. 

And keep in mind, these are objective findings.  These don’t take into consideration the value of the reduction in stress and increase in confidence that client’s experience when working with an advisor.  These intangibles carry an additional value that only the client can quantify for him/herself. 

Let’s put this together into an outline that you can follow the next time a client asks, “Are you worth it?” 

CLIENT, “I want to have a conversation about the fees we are paying on our investment accounts.  I’ve heard that advisors are ‘expensive’, and I want to make sure I am making a good decision with my investments.” 

ADVISOR, “Absolutely.  I think this is an important topic to revisit from time-to-time.  Actually, I recently asked the same question and did some research to answer it for myself.  I always want to know that clients are getting value from the services we offer.  Let me share what I found.” 

“Here are a couple of research papers from different organizations.  They all look at the question from a slightly different angle." 

-This one from Vanguard found that working with an advisor improves net returns by about 3% over time. 

-This one from Morningstar found that sound financial planning increased retirement income by 29%. 

-And this visual from AthenaInvest shows the impact on net worth of having and following a financial plan.” 

“To tell you the truth, I was a little surprised at how much quantifiable value actually shows up in the research.  The major impact I see every day is more along the lines of the reduction in stress and improved confidence that clients share with me and that is a little harder to measure.” 

“Doing this research made me feel pretty good about the X% fee we charge for asset management.  It seems like a fair price for the long-term value.  What do you think?” 

Most clients will respond very positively to this conversation.  Your openness and your fact-based response will make them feel better about the decision they made to work with you.  

It won’t work with everyone, because it isn’t always rational argument that you can win.  Some clients will use fees an excuse to beat you up or fire you.  It may or may not be about the fees at all.  

As hard as it is to hear, you are better off without those clients in your practice.  If they don’t find value in the relationship and the Advice-based Planning services that you offer, then no amount of research will sway them.  Let them go! 

The best thing about doing this research for yourself is that YOU will feel more confident in your own value.  And when that is true, clients will seldom question that value.  They will feel it in every interaction with you! 

With Purpose,

-Lucila

I am going to challenge you to do a little bit of introspection.   When you read the Vanguard and Morningstar studies and you see those areas of planning that lead to high levels of value, are you confident that you have a process in place to consistently deliver on those promises…for every client? 

Have you built an Advice-based Planning process that delivers those services consistently and predictably to every client, every time? 

If you aren’t sure, take this free PRACTICE ASSESMENT to see if you are delivering a high-value, client-centric, comprehensive financial planning EXPERIENCE. 

If you aren’t quite there yet, we have a lots of resources to help you along your journey!