'Stop talking about fees, start talking about value'

Advisors told to re-frame the conversation and stop conceding so much ground to client concerns

'Stop talking about fees, start talking about value'

When “fees” are all you hear from clients, advisors should start talking about “value”.

That’s the message from Russell Investments’ head of business solutions, Sophie Gilbert, who coaches advisors and leads group seminars around the world.

She said that, consistently, two-thirds of the advisors she speaks to face regular questions about their fees from clients. In part, she blames robo-advice for this downward fee pressure, but also thinks that advisors are giving up too much ground to their clients’ concerns about cost. In her mind, it’s up to advisors to reframe the conversation.

“So this is definitely a universal question: ‘I've been working with these clients for so long, I do so much work, so why would they be questioning my fee?’ Gilbert said, of her interactions with advisors. “I always tell them, ‘listen, we have tools available to equip you with being able to speak with confidence and conviction around not your fees.’ We call it ‘the value that you deliver’.”

Russell Investments makes a hard case for that value. Their Value of an Advisor study lays out in plain numbers how an advisor exceeds the value of a 1% fee and the savings a client might think they’re getting from a 35bps robo-advisor. It calculates the value of annual rebalancing, overall planning, tax smart investing, and the key role an advisor can play in correcting emotion-driven behavioural mistakes a client might make. The study pegs the value of those services as worth at least 2.79%, well beyond the standard 1% fee.

To Gilbert, though, the numbers side is only half of the equation. She stressed that advisors need to be proactive with their clients, demonstrating that value again and again. A client might sign up thinking that the 1% fee is fair, she explained, but over time they may grow to resent that and wonder what they’re getting for that fee.

Advisors need to reframe the conversation and talk about the value of their advice at times when clients need it most, those key transitional moments in clients’ lives when finance, emotion, and discomfort get muddled up together. It’s an advisor’s job to clarify things when they get messy. Doing so well will show a client what you’re worth.  

Language is key at every stage. Overuse of the word “fee,” no matter the context, will start to put a client off. Value needs to be couched in language that goes beyond numbers, into elements like ancillary services, human connection, and the rational approach to investing you bring. In other words, replace “fee” with “value”.

“If you start talking about fees all they're going to have in their head is percentages and dollar figures,” Gilbert said. “Instead, what we need to do is talk about the value that we deliver to clients because it goes way beyond dollars and cents.”