Any advisor would love to be told they are one of the best in their profession by their business coach. Less reassuring, though, is being told, “You are one of the grossest cases of undercharging that I’ve ever come across.”

“I’m glad he said it,” said Esther Althaus, FChFP, an eight-year MDRT member from Melbourne, Victoria, Australia, who had hired the coach to examine her clientele’s level of engagement, “because I’ve had coaches in the past who were too scared to tell me what I needed to hear.”

Knowing what to do with that insight, however, is another matter altogether. Althaus is the sole advisor in her practice, which also employs a mortgage broker, two full-time and two part-time support staff and focuses on intergenerational wealth management. In more than 20 years of business, Althaus’ client list had ballooned to 2,000 after acquiring clients from older and retiring advisors with low-touch service models. Many of those clients were not just disengaged, but not profitable to the business after regulatory changes were made in Australia regarding commissions.

The business coach recommended that Althaus have difficult conversations with clients about her fees — leading to a massive transformation of her business that is still in progress and moving toward a goal total of 600 to 700 clients, 200 of whom are committed and engaged. That conversation starts with being direct about the situation: “There have been a number of changes in financial services,” Althaus tells her clients. “A business has to review its operations from time to time, and I’ve gotten too big to be in a position to service everybody who is connected to the business at the moment.”

Know your value

Althaus takes a “my house, my rules” approach. She needs to be in control of who she works with and how much they pay. If a client isn’t on board for that, they don’t need to come over to her house anymore.

What does that mean in terms of keeping clients on board? It starts with telling preferred clients that she’s interested in working with people she likes. Althaus says that she values their professional relationship and wants to continue that moving forward. Then, more importantly, she identifies the value she provides.

Tripling her fees is necessary to remain in business and provide service, but Althaus also emphasizes the value that comes with that fee. That means “common-sense life advice” focused on looking ahead to ensure clients have “money for later” — a phrase she prefers to use instead of retirement planning.

When clients can’t afford her fees, Althaus tells them she cannot bring enough value to the client’s portfolio for the cost.

As she separates from such clients, she conveys that they are still welcome to call with questions or needs, and fees can be established based on what the client is seeking. For her 1,300 least-engaged clients, a letter was sent to communicate this information.

“People who know me would say I’m very outspoken and come across as quite assertive, but when it came to the fee conversation, I had been wavering,” Althaus said. “My coach pointed out to me that it’s healthy to have a little bit of fee tension in these conversations.”

Stay proactive

She says that most of the conversations have led to clients accepting the new fees. In one case, clients who were concerned about the fee tripling received a substantial one-time discount. “These are nice, decent people, who are not needy in what they need from me,” Althaus said. “We’ve established a nice relationship, and I can use my discretion a little as I see fit.”

It all boils down to the willingness to be proactive even when what needs to be done is difficult. Althaus references an Australian expression — “she’ll be ’right” — that asserts everything will be fine, and she suggests the phrase has its limitations. “We can only have that attitude to a point,” she said, “until we realize something’s not going to be all right if I don’t take action to do something about it.”

Contact: Esther Althaus esther.althaus@perspectivefs.com.au