Reason #27 To Get Client Feedback -- Your Clients Don't Like "Fee-Based"

Friday, April 13, 2012 13:34
Reason #27 To Get Client Feedback -- Your Clients Don't Like

Tags: Client advisory board | client communications | marketing


Advisors who don't seek client feedback don't know what their clients want, they know what the advisor thinks they should want.

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We all know that fiduciary is better than broker, and so naturally our clients would prefer us to be fee-based than commission-based, right? Of course. And that's why it's a great idea to attract clients by talking about how we charge fees.
Well, that makes a lot of sense to most of us because we tend to talk about our marketing with other people in the industry and not with our clients and prospective clients. As it turns out, clients don't like fees and they don't like to be reminded of those fees. So, when Sullivan and North Star surveyed investors on their reactions to different words we use in our marketing, for the 2012 update in their "Rebuilding Investor Trust" series, they found that 64% of respondents had a negative reaction to the phrase "fee-based."
Since fiduciary is clearly better for clients, you might also be surprised to learn that in a survey done last year by Cerulli Associates, about 47% of 7800 households surveyed preferred paying commissions compared with 27% that would rather pay a fee based on assets.
Of course, if you had asked your client advisory board to evaluate your marketing you probably would have heard about this already. Who better than your best clients to help you understand the most important messages to communicate in your marketing? This is the group with the clearest idea of what is most valuable about what you do, and their language for describing it probably differs from yours. It is possible that your clients consider the fact that you are "fee-based" to be one of the more important things that distinguish you from other advisors, but I suspect they will talk more about what you do for them rather than how they pay you.
One of the biggest mistakes we make in marketing our practices is to dream up what we will promote and what we will emphasize without input of the people we are hoping to attract. Engage your clients in an ongoing conversation about your value, and you will find you have a much clearer idea of what to say to attract more clients like them.


Comments (5)

Interesting little note in that article is that clients also like the words "no fee" ---- after return and results. I guess I'd like return, results, and trust, and no fees, too.

Since we don't work for free (yet) are you suggesting removal of all talk about compensation structure from webistes and marketing material, etc.?
vguettlein , April 17, 2012

The impression I get from most advisors is that clients recognize that they have to pay somehow. And, to the extent they don't it is mostly our industry's fault for giving away financial planning for so many years.

That said, I think it unproductive to discuss fees, and here's why: We tend to do that as a part of our value proposition. "You will like us because we charge fees..." Well, no. Clients like you for the positive outcomes you provide them. Let's talk more about those and less about how we charge, and we can be more effective at attracting clients.
stephenw585 , April 17, 2012
From the investors perspective there is little change in what is received from a commission or fee arrangement. The response makes sense, especially for those unable to account for the fee.

If you are a 'relationship manager' you should send out an invoice that accounts for the time spent on the client over the billing period. Every call, every time the portfolio, etc is looked at, etc. Show them what they get.

At CFC, we send out monthly reports that show our audit process on a monthly basis. First, check to see if benchmark meets goal. Second run analysis on 20,000 mutual funds versus the client goal, third rebalance or not. Show them.

They understand the commission's value based proposition. Consider the fact that a whole set of folks want to get a commission and call themselves a planner or advisor. you have to demonstrate, not just say so.
brentb843 , April 18, 2012
Stephen, I agree with you that our compensation structure is NOT our value proposition. The client is always, and rightly, asking WIIFM? But pricing structure is a differentiator. It's not the focus of our marketing, but don't you think it deserves at least a bullet-point?
vguettlein , April 18, 2012

you believe pricing structure is a differentiator. Here's my question: How important is it to your client? The point of the article is that before you go putting pricing structure (or anything, for that matter) into your marketing, you should be passing it by your clients to see if it resonates with them.

I was reminded of it today when I sat in on an "Ask the Clients" panel at the Tiburon CEO conference. The questions came up specifically: "Do you consider an advisor charging fees to have a superior offer than one who charges commissions" and the answer was an unequivocal "We don't care." If your clients say the same thing then, no, it doesn't warrant a bullet point. If they indicate that it is somewhat important, then it would get at least a bullet point.

What matters is not what YOU think differentiates you, but what THEY think differentiates you.

Thanks for your comments!
stephenw585 , April 18, 2012

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