Originally published in Financial Planning
By Yvonne Kanner
Wall Street analysts sometimes describe a stock selling at a discount as a value trap. The price is lower for a reason, they say, because of problems that arent readily apparent.
Such can also be the case with RIAs who cut their fees. The difference with advisors is that they are setting the trap for themselves. Discounting to attract clients is a short-term solution to the deeper problem of a weak sales process. The long-term consequences can be a devalued brand and compromised operations.
Advisors who are new to prospecting often use discounts as a crutch, or mistakenly believe reductions will be the prime catalyst for turning leads into clients. The most extreme example Ive seen is a 100% discount in the form of a first-year fee waiver.
The problem sets in as this discounting becomes a habit, an effort to close on sales without doing the harder work of clearly articulating the value of the product, then standing firm on a price that reflects this value.
Read the full story at https://www.financial-planning.com/opinion/rias-stop-discounting-your-fees
Yvonne Kanner is president and COO of Fiduciary Network, which provides funding to wealth management firms for internal transitions of equity, acquisitions of other advisory businesses and buyouts of retired or inactive shareholders.