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Many financial advisors have a natural abrasion to raising their prices. And it makes sense: Once you consider raising your prices, your brain tries to convince you that you’ll lose all of your clients overnight.

Of course, this never actually happens. But it still feels real inside our brains. Well, that’s why I recorded this episode.

Not only will listening to this episode help you feel more comfortable with raising your prices, but I also reveal how raising your prices can actually make your services more attractive to potential clients.

Listen now.

Show highlights include:

  • The single biggest mistake the entire financial advisory industry makes which nukes their income (3:16)
  • Why adding more “value” to your offers doesn’t mean you can charge more (5:16)
  • The “Contrast Trick” which lets you charge double (or even triple) what you’re charging today (6:38)
  • How to charge 76.6% more for your offers by simply going to your office (9:15)
  • The weird way charging less for your services makes you seem inferior to your competitors (and how to prevent this natural phenomenon) (15:43)
  • The subtle “discount” mindset shift which helps you feel comfortable with charging higher prices (18:37)

If you’re looking for a way to set more appointments with qualified prospects, sign up for James’ brand new webinar about how financial advisors can get more clients with email marketing.

Go to https://TheAdvisorCoach.com/webinar to register today.

Go to https://TheAdvisorCoach.com/Coaching and pick up your free 90 minute download called “5 Keys to Success for Financial Advisors” when you join The James Pollard Inner Circle.

Want to transform your website into a client-getting machine? Go to https://www.theadvisorcoach.com/website to get The Client-Getting Website Guide.

Want a masterclass training in running effective Facebook Ads? Head to https://TheAdvisorCoach.com/ads-training.

Discover how to get even better at marketing yourself with these resources:




Read Full Transcript

You're listening to “Financial Advisor Marketing”—the best show on the planet for financial advisors who want to get more clients, without all the stress. You're about to get the real scoop on everything from lead generation to closing the deal.

James is the founder of TheAdvisorCoach.com, where you can find an entire suite of products designed to help financial advisors grow their businesses more rapidly than ever before. Now, here is your host, James Pollard.

James: Financial Advisors, what’s up? Welcome to another episode of the Financial Advisor Marketing podcast, if this is another episode for you. If this is brand new to you, welcome, I am glad that you're here. If you're a longtime listener, welcome back. There are now over 200 episodes of the Financial Advisor Marketing podcast. Wow, that's awesome, and I'm super grateful.

I was scrolling through the episode list and I realized there aren't any episodes about pricing or how financial advisors should price their services, so I figured I would chat with you about that topic this week. [01:06.1]

Now, this is not going to be an episode about how you should charge, meaning your actual business model. I am really agnostic when it comes to how financial advisors charge because I think a beautiful part of living in a free country is that consumers get to choose which products and services they use. They get to choose how they pay.

I understand that some people might think charging based on AUM is excessive, especially if somebody has a bunch of money being managed, and maybe it is. I really don't know and I don't have a dog in the fight, but I know that people might think driving a Rolls-Royce is excessive. They might say, “Oh, you're paying that much for a car? Why would you ever pay so much for transportation?” or some people will pay more money for T-shirts. There are plain white T-shirts that cost $10 and there are plain white T-shirts that cost $100. They both serve the exact same function and they can even look the same, maybe even exactly the same, but one can cost 10 times more. [02:04.2]

Is the person wearing the $100 T-shirt being harmed in some way? Again, I don't know. I really don't. I'm not just saying, “Oh, I don't know,” to be facetious. I really don't. But I thank my lucky stars every day that we live in a country where the person who buys the $100 shirt is free to do so.

Look, I have Inner Circle members who charge all sorts of ways. There are hourly financial advisors, AUM-based financial advisors, retainer financial advisors, subscription-based advisors, and so on and so forth. I've helped all of them from every single business model under the sun get more clients and make more money because I care about them and their goals. Not any one way to do business.

I want everyone to be more successful. I want all financial advisors to be happy, healthy and prosperous. I also want the clients to be happy, healthy, and prosperous. My job is to serve financial advisors and the financial advisors’ job is to serve the clients. No matter what you do, always make certain you're serving the client the best way you can. [03:10.2]

I wanted to record this episode because one thing I’ve noticed among a lot of financial advisors is they're not charging enough. This is especially true with the non-AUM financial advisors, the ones who charge a flat fee or hourly or subscription, and obviously I know pricing varies based on client situations, client complexity, the advisor's experience, and how well the advisor is positioned in the marketplace. I get that. We'll cover a few of those things in this episode, but, mainly, I want to talk about the psychology behind pricing and how financial advisors can get over the mental hurdles that come from pricing services.

The first thing I'd like to discuss is that there is no amount you can charge for people who do not want or need your services. For example, I do not like squash, the food squash, not the game. I don't care if I can buy squash for 10 cents a pound. I don't want it. It could be free and I would still prefer to pay for a different food. I think squash is disgusting. You might like squash. I'm sorry if that offends you. [04:11.8]

It may be heartbreaking, but there is a segment of the human population that will literally never pay for financial advice, no matter what you do or say. You might not want to accept that. You can fight it all you want and you'll go down kicking and screaming. As the old saying goes, you can lead a horse to water, but you can't make it drink.

I would even make the argument that you should be careful about even doing that, about even leading the horse to water, meaning, my personal approach would be something like, assuming the horse could understand me, I would go, “Hey, horse, there's water about a thousand yards over there. It's delicious. I think you should drink some,” and that's it. My philosophy is one of giving people the opportunity to buy. If someone doesn't at least acknowledge the value, I'm not going to waste my time. I'm not going to keep trying. I'm not going to keep pushing. [05:00.1]

Now, if the horse responded back with legitimate questions like, “Was the water cold? Did you drink any?” or “Do you have any way for me to store the water?” then I would engage in a conversation with the horse and I would potentially lead the horse to the water, but I'm not going to twist the horse's arm, leg, whatever—I don't know what you would say. I guess it's leg, right?—to do what I want. Life is too short for that.

I know it sucks when you're talking to someone and you know deep down in your heart, you could transform that person's life if he or she would work with you, but there's resistance. I've been there, I'm there all the time, but you have to learn to let it go.

I know some people will think, Oh, the reason people don't want to work with me is because I haven't made the value clear enough. Maybe. That can be true in some situations, but if other people are saying yes to you, those people are obviously seeing the value. You have enough value for people to work with you. [05:58.1]

It would be one thing if you tried to present an offer to the marketplace and nobody took you up on it. However, when some people are saying yes to you and immediately seeing your value, then, by definition, you're offering something valuable. You shouldn't let a few people who don't know your value stress you out and give you a hard time, and put you in an early grave.

With that said, in this episode, and I have a feeling that this is going to go to at least a second episode, maybe a third, I'm going to start throwing a lot of stuff at you. If you're the type of person who likes to take notes, then this is going to be the episode for you, because this is going to be rapid-fire, high-level information. Here we go.

In 2009, German billionaire, Adolf Merckle, committed suicide by jumping in front of a train. Woo, what a way to go. He was depressed because he lost a significant amount of its fortune, even though his net worth was still in the billions. You might think, He was a billionaire, he should be happy, and you're not wrong. I mean, not necessarily with the happiness thing, but, yes, he did have a billion dollars. Traditional economics deals in absolutes. A billion dollars is still a billion freaking dollars. Yet human beings aren't wired that way. Humans are wired to feel contrast. [07:15.5]

A homeless person who wins a $10,000 scratch-off ticket is going to feel on top of the world. Why? Because it's a massive positive contrast to having nothing. The question becomes, what are your services in contrast to? I’ve found a lot of financial advisors have their fees in contrast to the money that's being managed or money in the prospective client's bank account.

It's hard for me to describe this, so I'm going to try my best. If you charge $8,000 per year to work with someone and that person has $50,000 in the bank right now just sitting in a checking account, then your fee is being contrasted to the money in the bank. I mean, the person could have a $5 million net worth, but if they're taking it out of that account, that's what it's being contrasted to. $8,000 seems like a lot of money to take out of a checking account and give to you. So, I submit to you, why not contrast your fee to the cost of doing nothing? [08:14.2]

Let's say you give some advice on asset allocation that can save the person $160,000 over the next 20 years of working with you. Hmm, now things done changed, because that's the fee right there. Everything else is gravy on top. Assuming you keep charging $8,000 per year, which is another story by itself, you can explain that you haven't even scratched the surface of tax planning, charitable giving, peace of mind, a listening ear, and a resource for all the people in your network and more.

That's just one thing and you've knocked out the fee entirely, so you're contrasting it to something different. You're saying, hey, instead of looking here and being discouraged and thinking, Oh, boy, $8,000, that's a lot of money to pay for advice and advice is intangible and it's invisible and I can't feel it. I can't see it. I can't taste it. I can't hear it. I can't experience it until it comes to me and after I’ve paid the significant chunk of money; you can make it a little bit more tangible and you can contrast it to something even bigger. [09:15.4]

Next, I want you to think about the context in which you are charging your fees. I know it's nice to work from home and it can be fun to wear pajama pants and everything. I've got cool pajama pants, too. I think I have the Grinch pajama pants that I wear around the holidays, but think about this. Richard Taylor once did an experiment about how environment influences price.

Imagine you're lying on the beach on a hot day and you want a cold beer. Your friend offers to grab a beer from a rundown grocery store nearby. He tells you it might be expensive, so he asks you how much you're willing to pay, and he's only going to buy the beer if the store's price is no greater than your limit. If you say, “I'm only willing to pay $2,” he's not going to pay more than $2. If you say, “I'm only willing to pay $1.37,” then he's not going to pay more than $1.37. [10:07.2]

Taylor posed that question to executives in the early 1980s and he found that the average price they were willing to pay for a beer from the grocery store was $1.50. Another group of executives heard that same story except the place selling the beer was said to be the bar of a fancy resort hotel, not a grocery store, so you go from grocery store to Fancy Resort hotel. For that group, the average price they were willing to pay was $2.65. That's a 76% price increase, merely by changing the environment in which the beer was sold.

Both versions of the story made it clear the friend was buying the person's favorite brand of beer, your favorite brand, whatever it is, it was the exact same no matter where it was purchased. It wasn't bigger. It wasn't smaller. It wasn't colder. It wasn't warmer. It wasn't different in any way. It was the exact same beer. Yet people were willing to pay 76% more on average when it came from the hotel bar. [11:13.8]

Furthermore, when people were told the hotel bar charged $2, they described it as a fair price. When they were told the grocery store charged $2, they described it as price gouging.

Hey, financial advisors. If you'd like even more help building your business, I invite you to subscribe to James' monthly paper-and-ink newsletter, “The James Pollard Inner Circle”. When you join today, you'll get more than $1,000 worth of bonuses, including exclusive interviews that aren't available anywhere else. Head on over to TheAdvisorCoach.com/coaching to learn more.

Hear me loud and clear. The context in which you charge your fees has a lot to do with how digestible they are to your clients. I'm not the type of person who likes to spend money on fancy chairs and desks and monitors, but I'm also not the type of person who ignores clear empirical evidence. [12:09.7]

If you are a tight wad and you're trying to offer advice from a rundown office or, even worse, your bedroom, then I want you to keep the study in mind. Look, I know it helps to save a dollar here and there. I also know you have to get in where you fit in, but please think about this study.

Here's another little story. It's a story that combines both context and contrast. In 1961, Procter & Gamble introduced Pampers, the diapers. In the 1960s, their competition was cloth diapers. Pampers were disposable and parents were still using cloth diapers. Disposable diapers were positioned as a convenience purchase and thus more expensive. [12:51.4]

Then 17 years ago, in 1978, Procter & Gamble released another diaper brand called Luvs. Luvs were even more expensive than Pampers, and guess what happened? Sales of Pampers went way up. Nothing changed about Pampers except the context in which they were sold and the contrast to Luvs, because from 1961 to 1978, the context had changed in that disposable diapers were still more expensive than cloth diapers, but they were more accepted. People didn't have much to compare them to, though, except for cloth. When there were multiple disposable diapers, meaning Pampers and Luvs, people began thinking that the cheaper version was a much better deal.

The same thing happened at Williams-Sonoma, too. Williams-Sonoma once offered a fancy bread maker for $279, and I just checked on Amazon right before the show, and you can get a bread maker for $100 to $200. I personally don't own one. My point is that $279 was, quote-unquote, “expensive” years ago. [13:58.8]

William Sonoma added another bread maker for $429, and the $429 bread maker, it was a flop. It didn't sell very well. However, sales of the $279 bread maker doubled. The price seemed high when it was by itself, but once they added the $429 model, the $279 bread maker was no longer seen as such an extravagance.

Here is a high-level concept for you. Is there a way for you to explain to your prospective clients that there are even more expensive options out there? I know the cost of doing nothing is pretty high, but what else is there? Some of my flat-fee Inner Circle members, they do this. They compare their cost to something else. I have an Inner Circle member who charges $7,500 per year. It's billed in arrears at 1,875 per quarter. [14:58.5]

Guess what he tells his clients? He says something like, I charge $7,500 per year. I give you this, this, this, and this. If that sounds like a lot, then understand a fee-based financial advisor will charge you 1%. Since you have a million bucks, that's going to be $10,000. When your money grows to $2 million, you get charged $20,000. I will still charge you $7,500 per year. It doesn't seem like that much now, does it? There are lots of financial advisors who are using this approach.

Again, I am not telling you to do any particular business model, because I see the value in all of them. I see the value in hourly. I see the value in subscription. I see the value in AUM. I don't have a dog in the fight. I'm just telling you flat-fee financial advisors are doing this and it works well.

The big caution I want to give you, because this episode is titled like, “How to Raise Your Fees” or “Financial Advisors, Raise Your Fees”, if you are someone who positions yourself as charging less than someone else, you want to avoid making it seem as if you're somehow inferior to the person charging more, because that is what happens. Okay? [16:04.8]

If I came up to you and I offered a Lamborghini for $10,000 and it was a brand new Lamborghini, just came out, you would be like, Uh, what's wrong with it? because you're trying to figure out, Why in the world is this guy charging $10,000 if it's really a Lamborghini and it's brand new? You want to give a reason why you're charging less than someone else. This will justify your lower price and it will alleviate some of the fears that come from seeing someone charge less. Some of you might think that it's crazy that people have a fear of paying less, but it happens. It's real.

One good reason I found that justifies lower prices is having stronger systems, and a good reason for having stronger systems is because you have a niche. For example, the financial advisor who works with everyone who has a pulse might have to switch from working with an attorney to working with an entrepreneur, and those have highly-different needs, and the advisor needs to do a little research and do extra work to deliver maximum value. [17:04.3]

You, on the other hand, work exclusively with entrepreneurs, so your systems are in place and your processes are so streamlined that you can charge less while still delivering a better service than the other advisors, because you are spending all day working with the entrepreneurs. You see the same things over and over and over, and you have streamlined your entire business.

Please note I am not telling you to charge less. I am telling you to point out where other people are charging more, or other services or other companies are charging more. If you're currently charging $5,000 per year, I would encourage you to try to charge not the $5,000 specifically, but if you're charging anything right now, try to charge a little bit more, because as long as your value is there, you should have some price elasticity. [17:53.7]

If you're adding a $20,000-per-year value through the tactics you provide, the coaching you give to avoid behavioral mistakes or something else, then there is elasticity to go from $5,000 to $6,000, to $4,000 from $3,000, to $10,000 from $9,000. But in $5,000 to $6,000? That's a 20% increase in your revenue, so as long as you don't lose 20% of your clients, then you should be fine.

Actually, you can probably lose a little bit more than 20% of your clients and still be fine because your profit will likely be higher, but I don't want to get into the numbers right now. I do that in the Inner Circle Newsletter and I give people the nitty-gritty numbers behind running a real business.

I also realize there are a lot of feelings that come along with raising prices. It can be uncomfortable, but here's how I look at it. When you raise your prices, you shouldn't look at it as your new clients paying a premium. Your perspective should be that your old clients have been receiving a discount, and if you're still uncomfortable with it, then think about the number you want to charge. Sit on it for a little bit. Think about it. I’ve found you can get more comfortable with it, especially if you begin looking for areas in your life where you pay that amount. [19:13.0]

Which brings me to my last point this week, because I'm coming up on the 19-minute mark. Your business is a reflection of you. I know lots of people don't want to hear it, but it's true. If you are a crappy client, you will get crappy clients. If you're getting people who want to nickel and dime and negotiate with you, take a look in the mirror.

One of the best business books I’ve ever read is an obscure book called How to Sell at Prices Higher Than Your Competitors by Lawrence Steinmetz. As a result of that book and letting its concepts marinate inside my brain, I have zero squeamishness about selling, about price. I charge what I charge because I add tremendous value to financial advisors’ lives. I know not everyone sees that value, but those who do end up benefiting, so it's all good. I know what I bring to the table. I know that if financial advisors interact with me, I'm going to improve their lives and it has a benefit that can be measured monetarily. [20:11.5]

The most interesting part of the book was not about pricing models or justifying prices. It was about the mental side of pricing. Mr. Steinmetz said he would fire any sales reps who were price-shoppers in their own lives. Why? Because those sales reps would project their own beliefs onto their prospects. The sales reps would mistakenly believe their prospects bought on price. In reality, price is almost always more important in the mind of the seller than the buyer. The person trying to, quote-unquote, “sell” the price ends up doing all sorts of mental jumping jacks in order to justify it or worrying about what the prospect is saying or worrying about charging too much, even though people rarely, if ever, charge what they're worth. [21:00.4]

Personally, I’ve found that most people should stop worrying about charging too much and start worrying about charging too little, and we'll cover that in another episode. I know this might seem a little woo-woo to some of you, but when I started becoming a better customer/client, I started making more money faster and easier. I said yes quickly and people said yes to me a little quicker. I stopped telling myself that I needed to think about things or I needed to sleep on things, and people stopped telling me that. It was magical.

When I tell someone that I personally invest in myself without a second thought, like I whip out that credit card, I spend the money, I do it, it's wonderful. I can tell people that from a place of a hundred percent honesty. People know I'm being real with them and they respect that. When I tell them that I spend thousands of dollars per month investing in my own business, it's real. I'm not saying it to sound cool. If I ask a financial advisor to invest in himself or herself, it's because I know there is a benefit to be had because I do it. [22:02.3]

I still have a lot to say on this topic of pricing and raising your fees, and the psychology behind pricing, but I am out of time, so I'm going to continue this topic next week.

If you haven't subscribed to the Inner Circle Newsletter yet, make sure you do so over at TheAdvisorCoach.com/coaching, because, quite honestly, you can make back the $99 per month from one price increase as a result of this episode. If you take my advice here, the newsletter is pretty much free to you, so you're welcome for that. And I will catch you next week.

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