As the end of the year approaches, it may be time to consider adjusting your rate, even if it’s just a small increase for your clients. Maybe you’re ready to add new planning tools to your firm, or maybe you’ve grown drastically and now it’s time to hire on a new team member to help service your clients. Automatic fee increases, or fee escalations, can be a great solution to maintaining a positive cashflow as your business grows.
Things to Consider Before You Talk to Your Clients
You’ll want to be proactive and transparent about implementing fee escalations into your practice. Before you begin having conversations with your clients, it’s always a good idea to have your ducks in a row. There are a few things to consider, which may result in you needing to tweak some of your resources.
- How much should you increase your fees?
- Should it be an additional $50 to their monthly payments? Should it go up by 2% each year? Or should it be tied to the Consumer Price Index (CPI)? All of these are great options (and can be easily incorporated into your fee escalation on AdvicePay.)
- Does it make sense for all of your client fees to increase in January each year? Or will their fees increase at your client’s anniversary?
- When will the fees increase?
- If you’re contract doesn’t currently include verbiage about potential fee increases, now would be a great time to include that language.
- Consider adding verbiage to your website/marketing material that fees are subject to small annual increases which will be communicated at least 30 days before they go into effect.
How to Talk to your Clients About Fee Increases
If there can only be one key takeaway about the fee increase conversation, it is this: BE CONFIDENT! You know your value and chances are your clients do to. I suggest having a verbal communication upfront about fee increases, whether it’s a phone call, face-to-face meeting, or video conference.
You can start by highlighting the value you’ve given thus far in the relationship. Point out specific accomplishments clients have made since they’ve been working with you.
- “You paid off 50% of your student loans!”
- “You’re maxing out your retirement account!”
- “You’re contributing enough in your 401(k) to get the company match!”).
From there, you can explain why the fees will increase. Most people understand that costs of good goes up, and the same applies to the service you’re providing. Also, as your fee increases, you’re able to provide more exceptional service as you have greater access to tools, employees, and resources.
Lastly, explain that it’ll happen at a future date and their cost will continue to be transparent and easy to understand. I recommend giving clients at least 30 days notice before a fee increase. (This may be a great segue into a cashflow analysis!)
Building in Automation with AdvicePay
The sometimes-scary work is done after you’ve talked with your clients, but you may be worried about manually updating subscriptions each year for all of your clients. Our awesome team at AdvicePay has made it super simple for you to automatically escalate your fees on an annual basis. Set it up one time, and we take care of the rest. Your clients will automatically be notified before their next increase and can approve this on their end before it takes affect.
Remember, be confident in your conversations about increasing your fee. You aren’t asking for the moon, just to be fairly compensated for the life-changing value you provide. If you decide not to escalate your fees now, your current rate may become unsustainable in 3-5 years. Small gradual increases can be easier to swallow than a large bump to make up for lost time a few years down the road.
"If you’ve been wondering or thinking about a fee increase and are really concerned about the impact the fee increase would have, stop for a moment and ask is the risk really that clients won’t value what you do, or is the risk that you don’t value what you do enough to believe and have confidence that you’re worth the new fee?"
Want to learn more about our auto fee escalation feature?
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Posted by Honor Randall
Honor is excited to help AdvicePay users make the most out of our platform to help expand their businesses. Having worked in the financial industry for five years, Honor has considerable experience assisting financial advisors as a paraplanner. When she’s not helping enterprises implement AdvicePay into their business, you can find Honor running, cooking, and exploring National Parks with her husband.