Advisors who don’t seek client feedback don’t know what their clients want, they know what the advisor thinks they should want.
We all know that fiduciary is better than broker, and so naturally our clients would give us referrals because we are fee-based and not 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 Northstar 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. And you can work together to develop what they can say to other people to get you referrals.
Good post Stephen, I've been talking to Michael Kitces about this very issue. We need to fix it as an industry!
Duh! Talking about fees? That's like a doctor telling you how they get paid instead of what kind of medicine they practice. Who cares to be introduced to you based on how you get paid? If what you provide is of sufficient value, then getting paid shouldn't be an issue. As an advisor you can then discuss your fee structure as it aligns with your own core values and reason for choosing this career.
Richard,
Thanks for the comment! You ask a great question: Who cares to be introduced to you based on how you get paid? True – it doesn't make much sense. So, I have to wonder when I look at so many advisor websites and talk to advisors why they include "fee based" or "fee only" so prominently. (Remember when NAPFA came out with that "Fee Only" logo they encouraged all their members to put on their literature?) I agree with you – if what you provide is of sufficient value, how you get paid won't be an issue. So, we should spend all our time talking about what we do that delivers value, and drop our compensation method from our marketing altogether. People don't care about that!