Not too long ago an adviser posed me an interesting challenge.

“All this pricing work you do”, she said plainly, “Be honest. It’s just about coaching us to charge as much as we can get away with, isn’t it?”

Great question, and absolutely not.

Our research and coaching has shown us that most advisers undercharge. They do it for many reasons; perhaps they haven’t analysed what it costs to deliver each of their services, they don’t know how to work out what to charge, they fear rejection or antagonising clients, they lack confidence or even simply lack motivation to change what’s previously worked.

However, when a business goes through the process of reviewing their pricing model (which is always a positive experience when done well), they inevitably arrive at a figure. That figure is, in black and white, what needs to be charged in order to have a sustainable business.

But when is it too much?

Trusted position

Advisers are in a trusted position. If they are good at what they do, they are in the prime position to influence the financial decisions their clients make. Fees are one of those decisions. I trust in my adviser to undertake modelling of my situation inclusive of his fees. It wouldn’t make any sense to do otherwise.

Ideally, the value received from an advisory relationship will greatly exceed fees paid. How this is measured can vary; from actual dollar terms (the most effective measure of value) and the cost of stupid decisions avoided, to improvements compared against pre-advice years, a greater feeling of control or even something as seemingly minor as being able to buy a new car without worrying about the financial implications. The point is that type of relationship is symbiotic. The client achieves what they need, whilst the adviser is able to maintain a profitable ongoing arrangement that enables his or her business to prosper. It’s a classic Win-Win.

However, where a client doesn’t receive value from the engagement commensurate with what is being paid, issues are always brewing. It becomes a parasitic relationship. The planner and his/ her business may be nourished by the fees the client pays. The client on the other hand is not, and instead either knowingly or unknowingly is in a situation they’d be (literally) better off away from.

This isn’t confined to clients paying ‘big’ fees either. Plenty of parasitic relationships involve relatively small fees. Whatever you think of the ‘Compare the Pair’ advertising campaign (I personally believed it to be misleading), this is the chord Industry Super aimed for and struck so effectively with many consumers (and, clearly, legislators too).

Saying no doesn’t have to mean rejection

For clients (new or existing) for whom the latter might be true, the best advice might just be to send them elsewhere. There are all manner of businesses specialising in solving problems for specific client types and others able to transact more efficiently due to size or specialisation. This isn’t a bad thing. Not every prospect necessarily has to be a client any more than Elixir can help every business that seeks to engage us.

Alternatively, if there is doubt as to what the nature of the relationship really is, doesn’t that present an outstanding opportunity to re-engage and find out? Our experience has told us that it’s usually better to address the issue long before clients think of doing so themselves.

The point here is not to lambast advisers for this situation. The media does that unfairly enough already. I believe this conundrum is a by-product of the natural ongoing evolution of our industry. My experience has been that most planners I’ve met genuinely want to use their knowledge to help people in any way they can and hate saying no to anyone.

However, they say the road to hell is paved with good intentions. Saying no to a client needn’t necessarily be a rejection. Sometimes it can really be the best possible outcome for all parties.

This post was authored by Stewart Bell who was a coach with Elixir Consulting between 2010 and 2014.