Ask Judi: How to Manage a Client’s Expectations About Fees


Q: A colleague described a new way of breaking down their services and compensation for clients, which goes like this: "I get paid in three ways. There are fees for my financial planning advice; there's my commission when you invest money; and there's also payment when you send me referrals." What do you think of this lay-it-all-out approach?

A: Say hello to the old quid pro quo or, in this case, quid pro quo, plus quo, plus quo again.

I've heard people defend this script as a great way to condition new clients to think about referrals from the get-go. You can't start too early, they say. Others like the script's transparency: if you are up front about compensation, won't the client feel confident and more inclined to trust you?

With all due respect to Pavlov and conditioning, clients generally aren't so willing to sign up in your referral network. Frankly, I don't think they should be. And as far as trust goes, I think this script contains a fundamental flaw: the something for nothing flaw. That's bad for trust.

Because really, why should your new client be on the hook for referrals when they haven't even sampled the quality of your financial advice?

In a first meeting, the prospective client has no experience—positive or negative—of working with you. To my mind, this invalidates any referral requests for the time being. It's a step too far, and it can throw the whole arrangement out of balance.

Yes, the prospect will expect to know exactly what they will pay and what they can expect in exchange. But in the 'three ways' script, they 'owe' some intangible form of payment already. You're telling them you expect them to spread the good word about you. That's awkward, and often counterproductive. Not to be too harsh about it, but 'something for nothing' is the way of the loan shark.

Potential clients need your help and probably want to pay for it. It's honest dealing to let them know they're obliged to pay your fee and commission. Referrals, however, don't fit in that box. Clients are not there to enlist in your quest to fulfill personal income and client acquisition goals. This belongs in a later phase of your relationship than the initial phase, in which you begin working together. Don't confuse the two.

When it's time to ask for business—ask for business. Once you've established a rapport and done well by them, then ask for a referral. And be specific about the kind of referral you want.

You should be in every client relationship for the long-term. Don't worry about starting it off slowly. As with many relationships, you have to give before you get.

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Judi Rosenthal

Judi Rosenthal is a New York-based financial industry consultant and self-promotion coach renowned for her ability to win sales in any situation. She is also a recognized authority on niche marketing and coaching financial advisors in the techniques of amplifying sales through a well-engineered personal brand.

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Judi Rosenthal