Talking about fees with clients is typically not on your list of favorite things to do. However, when you are open and honest about fees then your clients have an increased trust in you and a better understanding of what they are getting for the fees they pay. This should translate into happier clients who will stay with you longer. While there are many benefits to this discussion it is not always easy to have. Here are some tips to make the conversation go smoothly.

Keep Things Simple

Fees in the financial industry are not always easy to understand or even easy to find. When discussing fees ensure that you are keeping things as simple as possible. Explain any terms that may be industry terminology, but that your clients might not understand. An example would be 12b-1 fees charged by mutual funds. You need to do more than just say the 12b-1 fee is 1%. Instead explain what the fee actually is actually for. (For more, see: 4 Tips on Being Upfront About Fees with Clients.)

It may also be helpful to break fees down into types. For example, you could explain mutual fund fees, as well as the fees you charge such as a percentage for assets under management.

Always Be Honest

While you want to keep things simple, you don't want them to be so simple that you are not disclosing every way you earn money. If you are going to take the time to talk about fees you should be honest and cover all fees. This includes any commissions or referral fees you get from investment companies.

While this might seem like an obvious piece of advice, it is crucial to be open about every fee you receive. Don't hide fees that may be hard to explain or that you have trouble justifying. If you have the fee conversation and your clients discover a fee after the fact then you likely just lost all credibility and probably the client.

Talk About Value

Instead of the conversation just being about costs, make sure to talk about the value of the services that are provided. Cover each service and what that means for the client. Does it streamline the management of their money? Do you help them with estate planning or do you include monthly reviews so they can make adjustments as needed? Try and approach this from the client's perspective making sure they understand what is in it for them. (For more, see: Advisors: How and Why to Justify Your Fees.)

Context

People have a hard time judging what is expensive and what is not, so give your clients an idea of where you fall when it comes to fees. You can do this by comparing yourself to other advisors that are similar. You are not trying to price match but to show where you are in comparison. By talking about value with the context component you can justify how even if your fees are higher, what they are getting is more than they would from other financial planners.

Put it on Paper

Put your fees on paper and use that as your review guide during the meeting. Remember to put a date on it so that as you change fees you can update the sheet and clients know what to expect.

The Bottom Line

Talking about fees is not always a fun discussion, but the more your clients know and understand the more they will trust you and appreciate the value you provide. This will also help lead to a longer client/advisor relationship. (For more, see: Are AUM Fees a Thing of the Past?)

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