Read the Transcript Below:
This is The Perfect RIA, in case you didn’t know. Bringing you all the strategies to help your business grow. Are you happy? Are you satisfied? Are you hanging on the edge of your seat? Sit back and listen in while you feel the beat. Another myth bites the dust…
Micah Shilanski: Welcome back to The Perfect RIA Podcast. I’m your cohost Micah Shilanski and with me as usual is the amazing Matthew Jarvis. What’s going on Jarvis?
Matthew Jarvis: Oh it’s life in the fast land. I was actually just in Las Vegas this last weekend, scouting out some potential practices to buy if the IRS is listening to this podcast. But yeah, life is good. Like you, Micah, we brought on a new advisor a few months ago and that process has gone really well, but it’s been fun for you and I to look and say, “Wow, these things that have become so routine for us, to see someone learning them new,” it’s provided a lot of inspiration for this podcast.
Micah Shilanski: Yeah. It really has been phenomenal to look at that and look at it through the eyes of someone from the outside. Because how much of what we’re doing do we just take for granted? And by the way, when we do our Mastermind Events, and this has come up a few times, people don’t realize that we were there where they are today. It’s not that aspect that we were just born and all of a sudden day one we had these practices that were there. We struggled for a long time to figure these things out, which is one of the reasons we really wanted to create The Perfect RIA Podcast, is to help those advisors laying out a road path of things that we just personally struggled with. And I know for a long time, I struggled with this fee conversation. How do you place your fee? How much do you charge? All of that head trash.
Matthew Jarvis: I got to confess. I wish I could say that I don’t struggle with these things now. I still do. They’re less frequent and they’re not as emotionally painful, I don’t have as much head trash. But Micah, I was telling you before this call, I was meeting with centers of influence this last week with Alex, and I rushed part of that process. And as our listeners know, we have a very specific center of influence process that works very well. But for whatever reason, I got nervous in the middle of it and I rushed the timing of it. Now, the guy is still sending us referrals, so I salvaged it in the end, but again, I got nervous and I rushed the process and I didn’t have the same credibility that I would have had otherwise.
Micah Shilanski: And let’s dive into that. Why do we get nervous? Going off script here so, oh well, but why do we get nervous in these conversations? Because by the way, from time to time, it still happens to me. I am not immune from this aspect of it even though we have dozens of clients a year that say yes to us all the time. Our client meetings, that’s just not new clients. In our client meetings as well, we have hundreds of clients that say yes to our recommendations all the time, yet now when we’re speaking to a prospect or a COI or something else, and we’re talking about our fees, we get nervous in that justification of our concept. Is this just the fee imposter syndrome kind of creeping out there? We don’t think we’re worth the money or scared of the no? I mean, what do you think a lot of this comes from?
Matthew Jarvis: Yeah, it’s definitely a lot of those things. Head trash has so many variations. I think though, a lot of it is lack of practice. And so with the center of influence, it had been a few months since I had done centers of influence meetings and it was at the guy’s office, we had our COVID masks on because that’s what he wanted. Again, that’s his preference, and so I couldn’t see his facial expressions, so that threw me off just a little bit. It was my first time doing it with Alex, that threw me off a little bit. Not his fault, definitely on mine. But just to be honest, I wasn’t practiced enough. I thought, “Oh, when the time comes, I’ll know what to say,” and then it gets awkward and nowhere does it get more awkward than the fee conversation. When someone says, “How much do you charge?” Or when it’s time for you to explain how much you charge, that’s got to be the most awkward one, I think, across the board.
Micah Shilanski: Yeah, it really does. There’s a couple of key points that you need to get in here, so we’re going to talk about these key points in these conversations that you need to have. But also then at the end, Jarvis and I will go through how we bring up the fee conversation. Now, one of the important reasons and one of the reasons I’m not telling you right now the way I talk about our fee conversation, is price out of place kills the deal. So you have to address client’s questions, a prospect’s question. So if I’m in a prospect meeting and they ask me what I charge, when I ask them at the very beginning, “What questions do you have that you want to make sure we’re covering today?” Jarvis, you and I ask that same question, right?
And we have a phenomenal follow-up. What else? What are the other questions that they have? And when they say, “How much do you charge?” I want to make sure I address that appropriately, and Jarvis, let me know if you do it any different, but in my world, it’s going to be that says, “You know what? That’s a great question. We’re going to make sure, before you leave today, I’m going to make sure I answer that in detail. But first, I want to focus on you. Is that going to be okay?”
Matthew Jarvis: Yep. I love that. That way, you’re not shying away from it, but at the same point, it’s a balancing act, Micah, to your point. We want to be transparent and assertive with our fee schedule. At the same point, if we rush it, and again, in our industry and really in most industries, if you told the client or you put it on your website, I know some industry experts advocate for that. “Well, my fee is X.” The client doesn’t have any way, or this case the prospect, to compare that fee to someone else. So if I say, “Hey, my fee is 1.5,” and Vanguard says, “Hey, our fee is 0.3,” we’re both CFPs, that’s their only data point. Of course they’re going to go with the 0.3. I need an opportunity to demonstrate my value so they can start shopping on value before they shop on price.
Micah Shilanski: Because we’re not doing online sales, and just because Vanguard, Schwab, Fidelity, I’m just picking on them because they’re letterhead, just because they’re doing it doesn’t mean we have to do it that way. We get to create our own rules of the game. We don’t have to follow their set of rules. They are selling things as a commodity. We are not. We are selling value, we’re selling the invisible, so we really need to articulate this a certain way to make sure, Jarvis, just as you said, clients understand the value that they are getting.
Matthew Jarvis: Yeah. And by the way, I can’t beat Vanguard and Schwab at their game. I can’t do it. They have the economies of scale, they have all these things I can’t be, so I’m not going to play that game. They can win the fee game. I can not win that game. I can win the value game. And so I’m going to win that game. So Micah, to your same point people on the initial call, that first meeting, “Hey, Matthew, I want to know your fees.” I say, “That’s really a great question. It’s going to depend on the complexity of your situation and more importantly, the value that we can deliver. But, before I ask you to pay us a dollar in fees or trust us with a penny of your nest egg, I’m going to make sure you clearly understand the value and the cost and I want you to make that decision on your time when you’re not here in my office. Is that okay with you?”
And they say, “That’s great. You mean, you’re going to explain what it is you’re going to do and tell me exactly how much you’re going to charge and then you’re to let me go home and think about it?” “Yep.” “Perfect.”
Micah Shilanski: And Jarvis, this is one of the key points that we had here, you want to give your prospects and clients a choice when they’re making decisions. Why? Because they already have a choice, right? They already do. Articulate it for them. Make it easy for them to make a decision. And this is where people mess up in the fee conversation. They lack clarity in what their fees are. So their prospects and clients don’t really know what they’re paying because they’re scared about it for whatever head trash reason that we all suffer from time to time, but they make it unclear and they don’t clearly articulate what their choices are. In both of our prospect processes, we make it very clear. Prospects can take our information and go do everything themselves. Because guess what? They can, already. That is one of the choices that they have. So we got to understand how the choices come together and we have to articulate how we’re going to bring value to them in this conversation.
Matthew Jarvis: Yeah. An interesting point on this Micah, and I know we want to talk about fees, but we’re kind of going all over, this is important. So I always tell prospects, “Hey, when you get our one-page financial plan, you’ll have three choices. You can take those recommendations and implement them on your own.” I’m holding my fingers up while I’m doing this. “You can go find someone else to help you implement them, or, and I’ll admit, this is my favorite choice, you can implement them with our team.” Now, once I thought about it, this is actually a really clever way to articulate it, but I started doing that because I was so nervous about the sales process, I was so nervous to try to back them into a corner on selling, that I was giving them outs.
Now it ended up working in my favor, but this goes to our thing. You’ve got to articulate the fee conversation in a way that empowers you. So if you get nervous by saying, “Hey, my fee is this.” Great, position it a different way. In fact, Micah, you ran into something similar to this with Christian, the advisor that you’ve hired recently in your office, had some qualms about saying your fee, which is on the high end of fees, but you’re on the high end of value as well.
Micah Shilanski: Absolutely. You know, it was his concern, and there’s none of this negative, it’s all very positive, but just going from where he was to where we are now, how do we justify that higher fee? And a lot of it is like stop justifying it. This is one of the really big keys in your fee. Do not justify your fee. Show value. So what do I mean by justify? I’m not going to go to a client and say, “Look, our fee is X amount of dollars because I’m going to spend 72 hours building a financial plan, I’m going to spend six and a half days a week in the office, I’m available, blah, blah, blah, blah, blah.” This is justification, right? That doesn’t matter.
And personally, on the other end of it, and I am not your ideal client so there’s that disclosure, but I cannot stand it when people bring that up to me. Because I don’t care what you do with your time. Your time does not affect me. What I care about is what value are you delivering to me? So don’t rationalize the reason your fees should be there unless you’re presenting it with value. This is the only time you can rationalize it. If you are saying, “I’m going to be delivering X amount of dollars in value to this client that’s going to be there,” and the value could just be peace of mind, by the way, that is a huge value add that you cannot quantify, but is a tremendous value to the client that’s there. So with that value, it’s okay to justify your price, but with nothing else.
Matthew Jarvis: So to recap a couple of these things, lead with value, don’t lead with price, and put the price discussion in terms and in a condition or a time that works best for you. So if someone springs the price question on you, be ready for that question, but don’t deviate from your system. I will not ever, on my initial phone call, talk about fees because it’s putting it out of order. I’ll give that quote that I mentioned a minute ago, and I’ll tell him here’s when we’ll discuss fees, and that’s it. If they say, “Hey, Matthew, I will not come in and meet with you unless you tell me your fees,” I’ll say, “Great. Well, I guess we’re really not a good fit for each other. I can’t quote you my fees until I know the value I can bring. And if that’s not how you want to do business, perfect, no problem.”
And I have no problem saying that because I’ve practiced that again and again and again. And I think when you’re less practiced with this, you have to, before every prospect meeting, say that out loud. And so I do that when I’m going into prospect meetings and to client meetings, whatever I think is going to be the most difficult part of that meeting, I want to practice it out loud before I walk in.
Micah Shilanski: Okay. Now I want to pick this apart real fast.
Matthew Jarvis: Yeah, please.
Micah Shilanski: Jarvis, you’re not exactly a brand new advisor, right? You’ve been doing this North of 15 years. You have a highly successful practice. You’ve been through all different types of things. But now, even today, 2021, when you’re going to go meet with a prospect, if you have concerns about the questions, you will practice out loud what you should be saying.
Matthew Jarvis: Yeah. A hundred percent, a hundred percent.
Micah Shilanski: One hundred percent.
Matthew Jarvis: Yep. And when I don’t, is when I struggle. Like I mentioned last week with a COI, I didn’t practice that ahead of time and I struggled. I was able to salvage it, and that’s where nearly 20 years of experience can bail you out on that. When you don’t have that experience, you’re not that quick on your feet, you’ve got to practice out. And again, this gets a little to the frou-frou, kumbaya stuff, I also take a minute, and this is just my confession, I visualize ahead of time, the prospect or in this case the COI saying, “Jarvis, you’re a sharp guy, I want to send you my clients.”
In fact, Micah, you and I were talking about this. I was talking with an attorney, I paid him for an hour of his time, he spends 57 minutes of the hour that I paid for telling me his life story, which I give zero care about. But, I stayed engaged the whole time because before that call, I had visualized at the end of this call, this guy is going to ask for my information to tell me he’s got clients that he wants to send me. So I stayed engaged the whole time with that visualization, and sure enough, Micah, at the 59th minute, he says, “Jarvis, I really like you. You’re a solid guy. Send me over your information. I’ll give it to my whole team. Anytime we have a client who’s retiring, we’ll send them your way.”
Micah Shilanski: Perfect. What are we solving for? What are we solving for? And this is even professional athletes. We don’t think of it. Professional athletes, they practice, they visualize, they go through. That’s the same thing we have to do. You want to know what the key to success is? Practice. This is the key. So I will do the same thing. We both talk about it in our initial prospect meetings or even client meetings. That five minutes before is really that golden time where we’re not on the phone, we’re not on text message, we’re not on emails. We’re really visualizing what’s going to happen in that client appointment. We’ve already prepped, we’re already ready for it, now we’re saying, “Great, how do I turn my entire attention to this client and this prospect?”
Another reason that you want to delay talking about the fees, what if I don’t want him as a client?
Matthew Jarvis: Yeah.
Micah Shilanski: Right?
Matthew Jarvis: Hundred percent.
Micah Shilanski: So—
Matthew Jarvis: —value to their situation.
Micah Shilanski: Sure.
Matthew Jarvis: Rare, but—
Micah Shilanski: Rare, but all these things are possible. So these are another reasons that you don’t even want to talk about the fee because you should not be ready at the beginning stage of your conversation to onboard them as a client. You haven’t done a full evaluation. This isn’t the mirror test, right? If they can fog the mirror, they’re our client. No. We’re going to have bigger screening that’s in there. My three are being personal, productive, and profitable. They have to be personable. I have to like them. They have to be productive. That means they have to be coachable and we have to be able to add value to their situation. And they have to be profitable. You got to meet all three of those. I don’t know that from a data form. I want to meet them, I want to chat with them, am I going to look forward to this conversation with them in the future? And if not, why even have the fee conversation?
Matthew Jarvis: Yeah, totally. Now, I want to make sure, Micah, that we cover people that have different fee schedules, including yourself. As we’ve talked about a lot of times in this podcast, you charge for that initial meeting. A lot of advisors do, or some, I don’t want to say a lot. Some charge an upfront planning fee, and so you got to be able to tell the client right, or the prospect, “Hey, it’s going to be $500, going to be $5,000,” whatever it is. How does that fee discussion change, Micah, for you in that case? And I don’t really want to comment on it because I don’t do that. And while I could pontificate on it, it would just be my theory. So I want to hear Micah, from you. You were charging a fee before you’ve demonstrated any value, right? In a way?
Micah Shilanski: That hurts.
Matthew Jarvis: In a way? Well, I mean, on the podcast and on your website, but yeah.
Micah Shilanski: No. And to be fair, I don’t have these conversations because I don’t talk to people unless they’ve paid the $500 to come in for the appointment. So this is where there’s solid RM, Relationship Manager, in my case Victoria, she has these conversations. So here’s what I think they go through, and if it’s too much, if she disagrees, we’ll have her on the podcast to explain it better. But basically when the client comes in, and we have about probably 60% of people that contact us, this is going off memory, it’s going to be close but it’s not precise, about 60% of the people that want initial appointment end up signing up for an initial appointment with us, which is really good.
Matthew Jarvis: So the other 40% hear your fee and say, “No. No thank you?”
Micah Shilanski: Yeah. The other 40% do that. They get with Victoria and they hear about the fee. They don’t want to move forward, which is fine. Last year, I think we had over 90 people contact our office for initial consultation. Not worried about 40 people not moving forward. We had plenty of people that did want to move forward. So the conversation-
Matthew Jarvis: I apologize for interrupting. I want to pull out one thing. You said if they say no to the fee, which, your words were, “Which is fine,” and it’s so critical as advisors, that we’re okay with that, right? So if you say my fee is 495 for that initial meeting, they say, “495? What in the heck are you doing?” “Great, next.” Nick Murray talks about us all the time in his book, Behavioral Investment Counseling. You have to be ready to say next. A lot of people, most people, even if 99.9% of people think that your fee schedule is terrible, perfect. You only need what? A hundred, 150 clients to have an amazing practice? You have to be 100% emotionally and financially ready for them to say, “No, not a good fit.” And you need to high five them and say, “Perfect. Thank you so much for letting me know. I don’t want to waste your time or mine.”
Even if you’re crushed inside for the minute. Okay, great. You know, lots of people won’t fly first class or buy Starbucks coffee. That’s outrageous price. They’re not crying over that. They’re like, “Right, next. We’ve got a hold other option for you or the whole other airline for you.” I want to highlight though.
Micah Shilanski: No, no, there’s an abundance of options. So they’re going to call in the office, or sometimes they just fill out our online form. They pay online, book online, they do a hundred percent without talking to our office. So that is one way to go. The most of the time they do call our office because it’s a higher dollar purchase. Victoria has the conversation explaining, she doesn’t jump right into the fee, she goes through and explains what this one hour consultation is going to be. “We’re going to go through, Micah’s going to answer your questions, it’s all about you,” et cetera, et cetera. Then at the end, she lets them know, “In order to book the appointment, we do charge a fee of $497 for it. And Micah is committed to delivering value. So what this means is that if you don’t think it was worth $500 by the end of the appointment, he will give you a hundred percent of your money back. No problem whatsoever.”
And so now, again, we’re committed to this because I don’t want anyone out there saying, “Man, that Micah, he ripped me off, got 500 bucks, didn’t give me any value.” This isn’t why I’m charging $500. I’m charging $500 because I don’t got room on my calendar for a hundred people. So, I need to start limiting that pool. One way to do that is to put a dollar amount on. Also makes me more excited about these appointments. So, that’s our initial phase that’s there. Jarvis, any questions before we move on to the conversation about fees from a client?
Matthew Jarvis: No, I think that’s great. And again, we can look at that refund by, Micah, your point, “I don’t want people to think badly of me,” but it also gets you off the hook as well. You could get into that meeting, decide, “Hey, I can’t bring value to this person,” and then just wrap it up and give them their money back. So you’re removing risk from them, which is critical for the buying process. You’re also removing so much risk from you, if you were nervous. And again, this is not right now, but earlier in your career, “I don’t know. Can I bring $500 of value? Great.” If I can’t, I’ll just tell them.
I do a similar thing when I tell them about our quarterly fee, I say, “Hey, every quarter you’re going to see that fee. You’re going to look at it and I’m going to look at it. We’re both going to decide if the value we brought is worth more than the fee. And if at any time you think the value is not worth the fee, we need to have a heart to heart discussion, or we need to part ways as friends. And if we do I’ll refund my last quarter’s fee as a gesture of good faith and help you find an advisor better suited to you than me.”
Again, it helps with the buy-in discussion. Also, buy-in decision helps gets me off the hook. If a client calls me and says, “Matthew, I don’t think you’re bringing value.” “Perfect. No problem.” Now, we’re going to do a lot of reflection and analysis on our side, but I’m saying, “Perfect, no problem. Here’s our last quarter’s fee. Where can I help you transfer the assets? Whatever I can do to make this as smooth as possible, because that was our deal.”
Micah Shilanski: And also with this, there’s a lot of psychology that goes into this as well. For one, refunding the last quarter fee. In the end, it’s really not that much money. That gesture of good faith, because the relationship went sour, is really, really smart just from that aspect right there. But the other aspect of it, you’re not having the client make a lifelong decision. Now, more than likely they’re making a ten year decision, right? But you’re not saying, “Hey, you’re committed to me for the next 10 years,” because everyone’s worried about they’re going to buy that thing, and it’s a timeshare. It sounds so great, then they can’t use it, and it sucks talking to Jarvis, you can never get on the calendar, he never answers his questions, and I’m just making this stuff up.
Matthew Jarvis: Yeah, yeah. Whatever they’re worried about.
Micah Shilanski: Whatever their concerns are, and how did you eliminate that? Very simply, of saying, “Hey, we’re going to do this for a quarter. The minute you don’t think it’s worth it, I will refund that last quarter’s fee and I’ll help you transition.” Period. End of sentence. These things, don’t think of them as minor, this is key. This is a key fundamental thing in this fee conversation.
Matthew Jarvis: Yeah, a hundred percent. A couple other things. From a mindset perspective, you need to remember that all pricing, everywhere in every industry, is arbitrary and made up. The price of a cup of Starbucks coffee, the gallon of milk, every single thing you buy, someone made up that price. So when you think, “Oh, my price is made up. I don’t know if it’s the right fee,” Every single other seller of goods or services is thinking the same thing, but you have to articulate it with confidence.
I mentioned I’ve been meeting with the COIs and I’ll always ask them, “Hey, can you give me a range of fees so I can set expectations with clients.” And one out of 10 says, “Yeah, my fee is 895 a month.” Perfect. Great. Now I know. The rest of them say, “Well, you know, it sort of depends on the complexity and we’re a premiere firm and so we charge a premiere fee, da, da, da, da, da,” and as a professional myself, I’m confused. And anytime a consumer’s confused, they start getting nervous. Like, wait a second. If you can’t give me a clean answer to this, where else can’t you give me a clean answer?
Micah Shilanski: And quite frankly, we were interviewing for new estate planning attorneys and that was one reason I really liked one, but we ended up not choosing to work with him. Really liked him in so many ways, but he could not answer my fee conversation. And at the end of the conversation, I was like, “Look, this is just brass tax here.” I was like, “I’m tired of dancing around it. What is your fee?” And he still couldn’t answer it. And I was like, “All right, I’m out.” I’m not bringing a client into this relationship with you when you cannot tell me what your fee is going to be. And don’t give me this crap of a $20,000 range. I drew a really clear picture on who this client is, and if you can’t articulate that for me, that’s a no-go signal with dealing with COIs. And I will be direct in that. How many of our clients will not be direct in that, will be confused by the fee, and they’re just subtly going to go away because you were not clear.
Matthew Jarvis: Yeah, totally, totally. We also see this, Micah, when you and I work with advisors and we ask them to explain their fee schedule, and we basically say, “If you can’t write this on the back of a napkin, it’s too complicated.” So when you say, “My planning fee is X, unless it’s Y, unless you do two thirds of this, unless you manage this much in assets,” it’s got to be a back of a napkin fee schedule so it’s just clear as day. Again, if you can’t answer this question clearly, how can you answer every other question that the client has?
Micah Shilanski: Yep. Yeah. So, so important. So Jarvis, let’s go through real fast, just real quick as a recap, let’s go through how we have this fee conversation to the clients and then let’s pivot to some action items for our listeners. What do you think?
Matthew Jarvis: I think that’s great. I think that’s great. You want to go first? We talked about how you answer the fee question initially, how you do it for that initial meeting. How about after that meeting or when they’re a little bit further through the prospect process? I guess, at what point are you sharing your fees and how does that discussion go?
Micah Shilanski: Sure. Well, let me step back. We did not talk about, at least I don’t think we talked about, how I’m going to charge my financial planning fees. All we talked about was that an initial appointment which Victoria has. So during that initial appointment, I’m going to evaluate to see if they would become an ideal client. Again, can we deliver a value to justify our fees? This is a big question. And if I can’t, I will totally walk away from that because I don’t want that type of relationship. So assuming it’s an ideal client, we wish to move forward with it … Oh, one of the things we didn’t talk about earlier in our list, you need to listen in your conversation for who is the decision maker with your husbands and wife. It’s not always the talker, right? So who is that decision maker that’s going to be there? And a lot of times I’ll let them bring up the question of the fee conversation.
But in the conversation, what I’m going to do is I’m going to chat with them at the end, as we start wrapping up, I’m going to recap our meeting, the things that they need to do, and I’m going to ask them if they would like help with this. Because we’ve spent an hour going through things, there’s a lot of action items, and if they don’t want any help, there’s no point in having a fee conversation. So, I’m going to ask them very simply, “You have a lot of stuff that you need to do. Is this something you would like our help with to take care of?” Simple as that. And then they’re going to say yes or no or tell me more about that.
Great. And then I’ll talk about how our financial planning firm works, that have a five step financial planning process. I’m skipping through all this so I can jump to the fee side. So, I’m going to go through our five step financial planning process, how we work through that. And what we do is we charge a flat fee in order to help them implement this. Now, the fee is dependent on the complexity. Our fees can range anywhere between $4,000 to $20,000 a year. But good news for you guys, to get things started for the first year, it’s only going to be somewhere between 5,000 and $5,500 for the financial planning fee.
Matthew Jarvis: Perfect. And then it’s stopped, right? It’s not, “Well, ah, is that okay with you? Does it feel okay? Um, um. I price shopped this against 17 other advisers.” You just say that, “Here’s ours. 4,000 to 25,000, great news for you, it’s going to be between 5,000 and 5,500.”
Micah Shilanski: Yep. And then I’m going to be quiet and I’m going to let them think about it and bring up the conversation. Also, if I haven’t identified who’s the decision maker, now this will identify who the decision maker is. So, I’m just going to shut up at that point. And then we’re going to talk about that. And I’m also going to bring in, and assuming they want to move forward with the financial planning fee, when we go through this, and again, we’re not signing things that day, I’m going to tell them to sleep on it that night, but we’re going to talk about it, that 5,000-5,500, and if we help with your investments, and keep in mind, we help with everything or nothing, then we’re also going to charge a fee for the asset management as well.
And that’s about as much as I’m going to get into the fee conversations. I’m not going to dissect it to 72 different ways. We’re going to talk about the flat fee, we’re going to talk about the percentage, they’re going to now think about it when they go home, and I’m going to give them homework to come back.
Matthew Jarvis: Yeah. Micah, what happens, and I know this doesn’t happen often because you share your fees with conviction, which by the way, just for our listeners, if you’re getting a lot of pushback on your fees, most likely you don’t have conviction in them, and they smell blood in the water. Micah, when you get pushback, how do you handle that? I mean, it has to happen from time to time, right? It happens to all of us from time to time.
Micah Shilanski: Absolutely. Absolutely. I will say when I get pushback, the pushback is generally only from the assets under management side, because they have a misconception in that on TSP charges or Vanguard charges, et cetera. I don’t really have that much pushback on the financial planning side. And I know that sounds a little crazy, but what have I done during the 45 minutes? I’ve evaluated to see if they’re an ideal client. So if I’ve done a good job in delivering value, there shouldn’t be a lot of pushback. When there is, one of the things that I’ll always say is, “You know what? We spent about an hour together. In this hour, have you gotten value from our conversation?” And they’ll say, “Yes.” Great. “Imagine what it would be like if we could spend a year together and do these things.”
Matthew Jarvis: I love that. Now, it may sound like, and this is the same with when you’re watching a standup comic or any performance, it might sound like Micah just came up that off the top of his head. That’s a line that he has said dozens of times, hundreds of times, probably practiced thousands of times, and he’s ready for that. So you end the fee conversation and he’s ready with that, “Hey, how much value did you get today? Imagine how much we can do down the road.” That’s not something where he’s like, “Oh, oh shoot. What am I going to do now? They pushed back on my fee.”
Micah Shilanski: And this is the important part about not the justification side of it, and Jarvis, I know you do a beautiful job of this going through yours as well. I’m not going to step back and say, “Oh, it’s because it takes me 10 hours to do this and 17 hours do this and 72, blah, blah, blah to do this.” It’s really about, I want to push it back to them. Did they see the value? And guess what? If they don’t see the value in that initial meeting, I don’t want to onboard them. This is a phenomenal red flag to me. This is, “You know what Micah, there was value today. I don’t think you can crush it for the next year.” “Okay, great. I wish you nothing, but the best of success. Thank you so much. If you didn’t find value today, happy to refund that $500.” I will absolutely walk away from that conversation.
Matthew Jarvis: I love that. And again, it’s about being ready for what’s going to happen. It’s that old Mike Tyson quote. “Everybody has a plan until they get punched in the mouth.” You got to be ready for that punch. It’s going to come and it’s not going to be as bad as you’ve imagined it. In your mind, you’re thinking they’re going to just beat you to death in a conference room, and really, half the time they’re pushing back just because they think that’s what they need to do or it’s their personality, and they want to consciously or not know if you have conviction. Because if you don’t have conviction here, you probably don’t have conviction anywhere.
Micah Shilanski: And Jarvis, I want to pivot to yours, but right before we do that, if you have not gone through, you as the listeners, have not gone through our prospecting system, I know I’m totally biased right here, you really need to do it. Because this is the end tip of what we talk about. There’s so much you have to do leading up to this, or that you should do leading up to this to deliver so much value, it becomes a non-issue. Because maybe one out of 10 I get push back on my fees. Maybe. Because they see the value that’s delivered and that’s what we have to do. All right, sorry. I’ll get off my preachy box. Jarvis, you have a phenomenal process that you go through and you do your 15 minute call, then you’re going to have a sit down, you’re going to go through their one-page financial plan. That’s a great process. Skip to that fee conversation side of it.
Matthew Jarvis: Yeah. So we’re at the second meeting, the end of the second meeting, I’ve gone through everything on the one-page financial plan, I’ve outlined for them, “Hey, you have three options here. Do it yourself, have us do it, have someone else do it.” And then they’ll, Micah, to your point, I like them to ask me, because again, I want to see who’s asking the question. If whoever asks, or if they don’t ask, at the end I’ll say, “Hey, you know what’s important here? It only makes sense to hire a professional, me or anyone else, if the value exceeds the fee.” Now for my fellow Nick Murray fans, that’s a familiar discussion. I got that from Nick Murray. The value exceeds the fee. Our fee is deducted from your account each quarter as a line item, it adds up to one and a half percent annually.
And I already mention this on a podcast, so I don’t want to repeat it here, but I just go through. And every once in a while I get one in 10, they’ll say, “Boy, I don’t know, Matthew. That seems like a lot of money.” I say, “I totally agree. We’re a top tier firm. We charge a top tier premium for that. Great news. We’ve already outlined what we can do together. It’s going to take us a quarter to implement this. As soon as we get done with this, if you think we’re not bringing more value to the table, let’s part ways as friends. You’ll already have all this great work done. And again, I’ll refund the last quarter’s fee as a gesture of good faith. I do need to warn you, however, full disclosure. That virtually never happens, Mr. and Mrs. Prospect. Essentially, all of our clients stay with us their entire life, but you can leave at any time. In fact, I’d love for you to leave at any time you don’t think you’re getting value.”
Micah Shilanski: I have to warn you. That’s that’s just brilliant. That’s great. Now, if you’re thinking this is salesy, I’m going to push back on you. We should have started with this. You should listen with open ears. Everything we’re talking about is designed for effective communication. You want to call it sales, go for it. Great. Don’t care. That word doesn’t offend me. This is effective communication with our clients, because guess what? If we cannot communicate effectively, even the fees that we charge, how are you going to talk to them about estate planning, about updating beneficiaries, about Roth conversions, about tax planning about long-term care? About home equity strategy? Like all of these things that are out there, how are you going to talk to them and help them achieve their goals if you cannot simply say what you charge?
Matthew Jarvis: Yeah, yeah. With conviction. And if you’re not confident enough in your value to let them make that choice. So we talk about this a lot. This is a free market that we’re in, for the most part. If I tell a client, “Here’s the value, here’s the fee,” that’s their choice. But if I’m not confident enough to even give them that decision, I’ve got some bigger problems at hand. This is head trash at a whole different level. Maybe you’re in the wrong industry at that point.
But if you can’t articulate clearly to clients, then who wins here? So they end up going to Joe blow rip-off advisor and he sells them a bunch of lousy stuff and they don’t update their estate documents. Who won there? Who took the ethical high road there? We’re communicating or we’re solving for delivering massive value, which means that we also get paid a massive fee.
Micah Shilanski: Yep. Now, one of the things is, as we go through with this, and Jarvis, push back on me on this one here, if you are a listener, having a hard time, you’re saying, “Great, Micah charges $500 initial consultation, 5,000 plus planning fee, 1.75% plus on AUM, Jarvis charges one and a half percent,” and this is like too high of a number and you can’t wrap your mind around it. Great. Work out a plan to get there. This doesn’t have to be a today thing. We did not wake up with this in place. This is something that we went to over time and saying, “You know what? We need to elevate our level to get there.”
So, that doesn’t mean stay where you’re at. That’s not okay. You have to push the bar up, unless you’re charging more than us. I’d love to have a conversation with you. Let’s talk about the fees and value that you’re delivering. But if you’re underneath that and you’re going to it, great. Create stairsteps, build your way up to this in delivering value.
Matthew Jarvis: Yeah. Yeah. Couple other critical things. Your fee schedule has to be non-negotiable, so when somebody pushes back, that’s non-negotiable. Every once in a while, maybe once a year every other year, I’ll have someone really push back and they’ll say, “Well, Matthew, I know that’s your normal pricing. What’s your pricing for me?” I’ll say, “Dave, you know, I would love to negotiate prices because I think I can do a great job for you and I’m really excited to work together, but if I negotiate for you, to have integrity with myself, I’d have to go back and give that same price to all my clients, and at that point I wouldn’t be running a profitable business. Therefore I just can’t negotiate on fees.” And the couple of times that’s come up, they said, “Oh wow, great.” And that’s that.
Micah Shilanski: I handle it slightly different when people ask me to negotiate. “Will you negotiate on fees?” I said, “Absolutely. I’m delighted to negotiate on fees. You are welcome to pay me anything more than this that you would like. I have no problem with that whatsoever.”
Matthew Jarvis: Yeah. Yep.
Micah Shilanski: That’s it. And generally, the spouse laughs, the person that asked the question doesn’t think it’s as funny. The spouse generally laughs and we move on. But no, the fee was created for a reason. All right. Let’s transition to, I know we could be here all day, but let’s transition to some action items that our listeners can take away and implement this week.
Matthew Jarvis: That’s right. Action item number one, you’ve got to be rock solid on your fee schedule. I first heard this idea from Stephanie Bogan, an old friend, to take your fee schedule and laminate it so that, yeah, it’s laminated, I can’t change it. Whether you laminate it or not, and by the way, I probably would, if you were struggling with this,-
Micah Shilanski: Oh, amen.
Matthew Jarvis: … put it on your bathroom mirror. And you say, “Why on my bathroom mirror?” Because I need to see that fee schedule again and again and again, and practice it enough times, that when I explain my fee schedule, it’s the same as if you asked me my name. So if you say, “Hey, what’s your name?” I say, “Matthew Jarvis.” I don’t say, “Well, you know, my given name at birth or da, da, da, da, da. Hey, my name is Matthew Jarvis. My friends call me Matt. Micah calls me Jarvis. Call me whatever you want.” But your fee schedule has to come out with that much confidence. “What’s your address?” “33308 13th Place South. My fee’s one and a half percent.”
Micah Shilanski: Next. Perfect. This brings us right to the next action item, which is practice, practice, practice. Not only practice saying it, so again, you know it just like you know your name. Be comfortable in saying it. Know how to deliver that fee conversation and be confident in it. Visualize the client saying yes. Have the fee conversation, my eyes are actually closed right now, I’m visualizing, have that fee conversation in your mind, visualize the clients saying yes, visualize the client being happy with the services that you deliver. This is really, really important because it’s going to put you in the mental state to get the yes to help the client achieve their goals.
Matthew Jarvis: The last action item I’ve got Micah, and maybe we did these out of order, if you’re struggling with this at all, you’ve got to find a way to explain your fees that resonates with you. Copy Micah’s, copy mine. I got mine from Nick Murray and his book, Behavioral Investment Counseling and Simple Wealth, Inevitable Wealth. Find an advisor who’s crushing it, someone you respect, and say, “How are you explaining fees to your clients or your prospects? Can I record that?” And just listen to it again and again, make sure the words are yours. So, you know, I’m from Seattle, if you’re in Tennessee, you’re going to say it a little bit differently, or if you’re in New York, you’ll say it a little bit differently, but find someone you respect, mastermind from them, and just borrow theirs. Use theirs until you get confident in your own way.
Micah Shilanski: All right. So here’s the attorney disclosure on that one. When we say borrow it or use it, we’re saying use the concept. Literally, do not go and copy it from my website and paste it on yours. Yes, that has happened. Yes, I’ve had those phone calls with people, saying, “Please don’t do that. This doesn’t help you or me.” So don’t violate laws, but take the concepts. You don’t have to rewrite everything. You don’t have to, excuse me, recreate everything. You can take the concept, put it in your words, Jarvis, just as you said, and then implement it to your clients.
Matthew Jarvis: Yeah. Don’t plagiarize. I don’t want to have to send you a cease and desist letter because you photocopied my website and added spelling errors to boot. You know who you are.
Micah Shilanski: That’s right. You know who you are.
Matthew Jarvis: Perfect. Well, our last and final action item. As always, The Perfect RIA Podcast continues to grow by leaps and bounds, but if you could take just a minute, go ahead and give us five stars on whatever podcast platform you listen to, put in a great review. And if you have a request for future podcast topics or a question you would like Micah and I to answer, send an email to email@example.com and we’ll be sure to feature that on a future podcast episode.
Micah Shilanski: And stay tuned because we’re going to be coming out with live podcasts, and we’re saying it therefore now we have to. So, we’re going to be coming out with live podcasts because we want to interact more with our audience, which is you. So stay tuned for that on when those are going to air and come out. Until next time, happy planning.
Matthew Jarvis: Happy planning.
Hold on before we go. Something that you need to know. This isn’t tax, legal, or investment advice. That isn’t our intent. Information designed to change lives. Financial planning can make you thrive. Start today. Don’t think twice. Be a better husband, father, mother, and wife. The Perfect RIA. The Perfect RIA.