Mariner Wealth recently completed a survey of pricing at other large RIAs in the industry. Interestingly, Mariner found that its fee structure was lower than the majority of its competitors, even with a service offering that is unmatched in the marketplace.
As a result of the study, Mariner Wealth is evaluating its pricing structure to better reflect the value it brings clients. As you think about the results of this survey, is it time for you to evaluate your pricing strategy?
As an independent financial advisor, you know that determining the right price for your services is both challenging and crucial to conveying your value effectively. In today’s landscape of diverse advisory options, setting appropriate fees can help you grow your client base and ensure clients understand the worth of your expertise. To successfully price your services and justify their value, consider these four key steps.
1. Validate That Your Unique Value Proposition Aligns With Client Needs
The first step in pricing is to ensure your services are a good fit for prospects as well as your current client base. Are you delivering a comprehensive wealth planning experience? Do you take the time to listen to and understand prospects’ and clients’ unique goals? According to a recent McKinsey & Company study, clients place a higher value on expertise, trust and a holistic approach than on focusing solely on price. Clients who are solely cost driven may not appreciate the full scope of what you offer. Instead, seek clients who value the depth of your services and the personal connection you build with them. This alignment can drive long-term satisfaction and retention.
2. Clearly Define, Articulate and Consistently Reinforce Your Value Proposition
After determining that your services align with client needs, clearly define your value. Are you only managing investments, or are you providing a comprehensive suite of services, including financial planning and more from Mariner’s broad spectrum of offerings? McKinsey’s research underscores that advisors who discount their fees hoping to boost growth or client satisfaction rarely achieve success. What clients remember isn’t the price—it’s the quality and depth of your service. Advisors who focus exclusively on portfolio management may face fee compression and competition from low-cost robo advisors. Instead, your value proposition should highlight the broader services you offer, such as goal setting, retirement and college planning, estate strategies and behavioral coaching.
3. Assess If Your Fees Are Properly Aligned With Your Services
Pricing correctly doesn’t mean being the cheapest option; it means charging what your services are worth. Clients who understand what they’re paying for see fees as reasonable if they feel they’re getting meaningful value. As the saying goes, “Cost becomes an issue in the absence of value.” So, rather than succumbing to industry fee compression or concerns about a potentially uncomfortable conversation with a client, evaluate your own service offerings. Are you simply managing investments, or are you giving clients peace of mind through holistic planning and ongoing support?
Most advisors, consciously or not, offer more than investment advice alone. Think of the countless times you’ve helped clients set financial goals, managed cash flow or reviewed their risk management strategies. Clients are also likely unaware of the many “small” tasks you perform—those quick check-ins, reminders and behavioral nudges that steer them back on course. These intangible elements are part of your value, even if they’re harder to quantify.
4. Avoid Fee Discounting—It Can Backfire
Does a large company that manufactures airplanes choose the lowest cost provider for a subcontractor who builds exit doors? No, they choose the best-priced contractor who does great work and delivers a great product at an attractive cost. Look at yourself in the same way. As long as clients and prospective clients see that you create value in their relationship with you, there will most likely be little if any pushback on fee structure. Lower pricing does not increase client satisfaction.
Discounting fees may seem like a way to help increase your client acquisition metrics. Please be aware that statistics show that fee discounting does not increase client retention. In fact, once clients see you are willing to discount your fee, you may expect there will be further fee discount requests from them as you further cannibalize your business. If you receive a fee discount request from a prospective client, you may want to consider a response such as “I have clients who have worked with me for 10+ years, and I charge them my standard fee schedule. If I discount your fees, as a new client, how can I justify this to my long-term clients who pay us our standard fee?”
5. Communicate Your Value Clearly to Clients
Transparency is essential. McKinsey’s study indicates that clients are more satisfied when advisors are up-front about pricing. But transparency goes beyond just sharing numbers—it’s about explaining what those numbers cover. When clients understand that their fees go toward more than just portfolio management, they’re more likely to feel the cost is justified.
In client meetings, consider how you present your services. Do clients know that your fee covers ongoing support and behavioral coaching? Are they aware of the additional guidance you provide, such as coordinating with subject matter experts? Many advisors perform services that clients don’t directly see, such as helping them make level-headed decisions during market downturns. By clarifying these “behind-the-scenes” aspects of your service, you can help clients see that they’re paying not just for investment returns but also for consistent guidance that helps them achieve their financial goals.
The Bottom Line
Correctly pricing your services and clearly communicating the breadth of your value can make a significant difference in client retention and satisfaction. It is important to emphasize the unique, personalized and comprehensive approach you bring to the table. When clients truly understand the value you provide, they’ll be more than willing to pay for it.
For more information regarding pricing your services, check out the Pricing Value Guidebook
For Investment Professional use only. Not for use with the public.