My father, full-time accountant and part-time antiques dealer, was Kent’s answer to Arthur Daley and I learnt from a young age that any price was up for debate.
It may come as a surprise that when it comes to fees for professional services, I strongly recommend that the price is not up for negotiation.
Since Wingate Financial Planning’s inception we’ve offered clients a limited range of services, each with a discrete fee attached. A significant benefit of this is that certain clients, who know what they want, like the simplicity and can make an immediate decision. Others will see it as an invitation to negotiate.
We can’t blame the client. The most painful of these discussions, have normally occurred when I’ve not highlighted the value of what we do. This is compounded by the cacophony of confusing messages; ‘advice is free’, ‘the provider pays’, ‘commission will be banned’, etc. Our message is different, and this can confuse.
It is also hard for us to explain the value of what we do. Many clients, especially business owners, have been trained to make judgements on quantitative bases. What they want, and we cannot give, is assurances over annual returns, future tax saved, etc.
For these reasons we give away a certain amount of value for free.
Nevertheless there are some individuals who treat fee negotiation as a game. I’ll tell them our fees and they seek to reduce it.
There are different strategies; asking us to match or beat another firm (whose services are invariably different to ours), reduce the work or services we are undertaken or simply a potential client will do nothing (under the assumption no action is better than paying for advice).
The first lesson we learnt was that we may never attract these clients who have typically gone for a short-term gain.
We considered whether we should offer the client to select or deselect elements of the service. The problem is what elements can you drop without prejudicing the advice you give?
Although we agree our fees in advance, and had agreements in place for many years, we are now refreshing our terms to make them ‘RDR-friendly’. This puts our fees under the spotlight again and we expect them to be challenged. This does not mean we will reduce them, nor have we set any historic precedents.
I am of the mind that if we reduce our fees for client A, and client B is receiving the same service in all other regards, it cannot be fair to charge A more or less than B.
It also seems unfair that some firms operate a policy of using existing client monies to subsidise the attraction of new clients.
In very rare circumstances we do offer ‘dual pricing’, for example, some employees of our corporate clients will have an agreed minimum service through their employer. As the employer covers the cost of an annuity purchase, we may discount our initial work for the establishment of a drawdown contract, but never discount the on-going service.
Ultimately I do not believe clients select their financial planner based principally on fees, nor indeed that fees are any significant part of the decision making process; as long as a client feels the fees are reasonable and trusts their professional adviser, the debate about fees is largely a game; a game that we, as a profession, have encouraged clients to play.
Alistair Cunningham is financial planning director at Wingate Financial Planning