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To Fee, or Not to Fee? [Episode 22]

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Some common questions that Matthew and Micah encounter are: “should I charge a commission? What about a planning fee? How much of a percentage should I take for that?” And so forth.

If you can think of any variation of question regarding fees, Matt and Micah have been asked it.

And so in turn, to set your mind at ease, they spend the entirety of this episode setting up simple systems and tips for determining how much, when, and why you should charge a certain rate.

Below are the most telling aspects of the episode.

[#1 Make a Business Plan ]

  • As Micah states, it’s ok to charge different amounts for differing levels of service. When likened to what a motel charges, depending on the amenities, service, and value you receive, the price expected will rise in response.
  • And the way to really know how much you should charge is to break down the financial goals for your firm through a business plan. This is the first thing that should be done. The purpose is to delineate the amount of money needed to be able to guarantee that clients will receive the massive value they deserve.
  • But Matthew confesses that he didn’t really have a business plan in place until his practice was a little more profitable. A decade ago he used to charge 1% for certain fees (to keep it simple). So he offers that as an alternative to a business plan until your practice is robust enough to warrant one.

[#2 The Many Different Types of Fees ]

  • Income fees, asset fees, hourly fees, commissions, and the list goes on. How should you build a system around the many different types of fees out there? Both Matt and Micah suggest that you don’t overcomplicate the issue.
  • Matt also likes to stress that perceptions of fee-only advisors could be that of the slimy used-car salesman. But really, there’s no one way of charging that is better than the other. It’s up to you as a person: your integrity, character, and the value you bring to your clients.

[#3 Don’t Stigmatize Any One Type of Fee ]

  • As Micah elaborates in an anecdote he shares, he provides direction to clients regarding insurance. It doesn’t earn him a lot of revenue, not by a longshot. But it definitely brings value to his clients who would be thrown out to the wolves in certain situations.
  • Matthew echoes this sentiment by stating that commissions shouldn’t be stigmatized. That is, you shouldn’t feel the need to protect your clients from certain methods of fees (commissions from an insurance agent), you should only focus on bringing clients as much value as possible. So if that means someone else is getting a commission based on your actions, there is nothing inherently wrong about that dynamic. The outcome for the client is most important.

[#4 Transparency With Fees ]

  • Micah expresses his dislike of surprise fees and undisclosed commissions. Again, whatever fee you decide on (fee-based, fee-only, commission, etc) doesn’t matter so much. There’s nothing wrong with any one of them. But you have to make sure to communicate all you can about fees to the client.
  • And this transparency has a lot to do with your integrity as an advisor as well. Being willing to openly discuss how and what you charge is key for perceptions of your integrity for clients.

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Matt and Micah’s Action Items

  1. Let your fees reflect the real value you bring to clients. Not through some abstract interpretation that is far removed from the actual operation of your practice.
  2. Jump on Joe Lukacs’ website: http://practicepower.net/. For his resources on how to cultivate the necessary internal dialogue for bringing value to clients. He calls it My Operating System (MYOS).
  3. Look to see what the non-independent brokers (the wirehouses) are charging their clients. This is just for a frame of reference for what you should be charging your clients relative to the service and value that you provide.

More details at: https://theperfectria.com/to-fee-or-not-to-fee

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Produced by Simpler Media

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