Voices

The secret to attracting new clients?

Some of today’s pricing models may not fit the bill for today’s potential clients, especially those looking for more clarity on fees.

Almost 37% of firms are charging the exact same 100 basis points regardless of the services provided, according to the 2016 Fidelity RIA Benchmarking study. This means that some firms are only performing investment management, while others offer additional services like extensive financial planning or tax work.

Not every client is getting the same suite of services, and exceptions or discounts are fairly common. However, by focusing on three key factors, firms can hone in on the right pricing model and stand out from the 100-basis-point pack.

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MOVING AWAY FROM BUNDLING?
A focus on transparency can go a long way. One way to improve transparency is to unbundle your offerings. This means charging separately for different services.

Firms can also evaluate alternative pricing structures, such as annual retainers, or one-time flat fees, and the potential impact these changes could have on their financials. Either way, moving away from the fully bundled fee may reduce simplicity in some ways, but the trade-off will be worth it in the eyes of many investors.

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IRVING, TEXAS - October 8th: Fidelity Conference, Four Seasons. (Photo by Shannon Faulk / Getty Images for Fidelity)

MAXIMIZING VALUE
Unbundling your offering also helps you align your pricing with the value you provide by better matching fees to the services your clients need. To take it a step further, you may also consider establishing processes to measure client-level profitability or set minimum-fee levels.

The Fidelity study also found the majority of firms (81%) set some kind of client minimum, yet 23% of their current clients pay fees below those cut-offs. By better understanding client-level profitability, you can make sure that your minimums are set at the right level then stick to them.

Also, be sure to consistently communicate your firm’s value proposition, pricing philosophy and detailed pricing model to help them clearly understand the value your firm delivers for the fees that they pay.

KEEPING UP WITH COMPETITION
While firms may be undermining their perceived value, they may also miss out on valuable clients that don’t want to buy a package of bundled services.

To help remain competitive, consider implementing a client segmentation scheme by tailoring offerings, service models and pricing models to not only existing clients, but new segments as well.

Defining segmented approaches to different groups allows you to more consistently meet investors’ needs while keeping you from fully customizing for each individual.

When considering a pricing model for your firm, think carefully about the experience a prospective client will have; and, be clear on your pricing model, and how that model reflects the value you bring to the table.

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