Financial Advisors have never had access to more channels to find high-net-worth prospects. But with growing competition and limited time to focus on marketing, many Advisors are unsure which channels will deliver the best results for their business.
That’s why RFG Advisory created the Advisor Growth Study Club. It offers the Advisors who partner with RFG a regular opportunity to discuss their growth strategies, share insights about specific channels, and learn from their peers’ success. Each monthly session, hosted by Chief Behavioral Officer Brendan Frazier, features a different guest speaker exploring their most impactful growth channel.
In this month’s session, Advisors tackled the critical topic of raising client fees, guided by industry veteran Steve Atkinson. With over 30 years of experience, Steve shared practical strategies and insights on navigating this often-sensitive conversation, helping Advisors communicate the value they deliver with confidence.
Advisory Fees: Where and Why to Increase What You Charge
Steve presented three common reasons an Advisor might need to raise fees:
Unprofitable Clients
Many Advisors find themselves with clients that are priced too low to justify keeping them on the books. Based on current rates, the time spent servicing these clients may be a net loss due to the opportunity cost.
There are a few reasons this occurs:
- Legacy pricing: You signed the client many years ago when your prices were much lower.
- Discounting: You offered the client a reduced rate to secure the deal but can no longer justify the discount.
Steve notes that this is a problem many Advisors struggle to address. Rather than increasing their fees, they simply grow their business to compensate for the low fees.
Expanded Services
Advisors often find themselves providing more services than they did when clients were signed. As a result, their pricing is no longer commensurate with the effort or value they offer – and they need to increase their fees to warrant the extra services.
This could be the result of two scenarios:
- Scope creep: Your client has slowly introduced new service requirements, which is particularly common as clients age or build a family.
- New services: You have introduced new services to your offering which the client benefits from but may not have explicitly asked for.
In both cases, raising your fees is essential to designing income that reflects your value.
Cost Increases
The fees you charge must factor your business’s daily operating costs. From office space and equipment to software subscriptions, clients must understand that these expenses are not static – and are likely to increase over time.
You operating costs might increase for many reasons, such as:
- Technology: An Advisor must procure new software or hardware to ensure your clients receive the best possible service and have access to the latest investment options.
- Human capital: An Advisor may need to hire more staff to cover the client’s full range of requirements and deliver the service they expect.
- Compliance: Regulatory expectations have been increasing in recent years, which requires Advisors to have Chief Compliance Officer with serious experience on staff.
But how should you approach the conversation when these problems arise?
Three Ways to Raise Fees With Confidence
1. Focus on Long-Term Value
When you raise your fees due to a scope increase, clients may push back, saying, “But I don’t really need that service.” Often, this reaction stems from short-term thinking. It’s crucial to reframe the conversation around the long-term value of your services.
Steve advises positioning your service as a safeguard for the future. While your client might not need a particular service now, what happens if their circumstances change? Finding a new Advisor in the midst of an urgent need will take time and will likely come at a premium. By investing in comprehensive services now, they’re setting themselves up for long-term security.
This points to a key insight: Advisors should be careful about how they frame their business against competitors. For example, Steve notes that some clients will point out that smaller or lower quality Advisors charge less. Advisors should shift these conversations to focus on quality and make clear that they charge more because they provide more value.
2. Speak Openly About Your Fees
Many clients are wary of fee increases because they suspect you are simply trying to get more money from them. As a result, Advisors need to build trust and credibility with their clients during these fee conversations.
The best way to build that trust is by being transparent about what you charge and how you justify the pricing. Steve shared a story about a panel of Financial Advisors who were asked how they work out their fees. One Advisors responded cagily and refused to be explicit about what he charges – which lost the audience’s trust immediately.
3. Be Ready to Walk Away
Fee conversations are ultimately a negotiation, which means Advisors need to be prepared to walk away from the client. You cannot discuss raising your prices already ready to compromise, or you are likely to settle for an unsatisfactory result.
The key here is to see all possible outcomes as an opportunity to improve your business. Either the client accepts your fee increase, or you are free to find new clients who align with your fee expectations. This will put Advisors in the fright frame of mind and ultimately increase the likelihood of success.
Grow Your Advisory Business with RFG Advisory
At RFG, we empower Advisors with intentional marketing strategies, tools, and content. Our goal is to help grow Advisors’ business organically, ultimately building their enterprise value. Our multi-channel digital marketing and communications platform, combined with an RFG-provided annual marketing budget, enables Advisors to grow their portfolios by 19% yearly—compared to the industry average of 2-5%.”
Want more advice on how to grow your AUM or start your own firm?