The ethics of pricing

Professionals serve the community, and that means charging fees that barely cover expenses, right?

Wrong.

Financial advisers are ethically obligated to charge fees that uphold:

- Best interest duty (and Standard 2 of the Code of Ethics).

- The value of diligence (from the Code of Ethics).

This means financial advisers are ethically obliged to charge fees which provide their clients with long-term relationships and to run efficient practices to stay in business for the long term.

Let’s unpack this.

Best interest duty and Standard 2 of the Code of Ethics

Is it in our client’s best interest to charge no or low fees? Sure, in the short term. We can probably stay in business for a couple of months doing that.

But in the long term?

That client will be orphaned if we go out of business.

If we start with the assumption that financial advice benefits clients (which it does), then it is in the client’s best interest to be able to get long-term positive impact from our advice and relationship.

This means that in order to act in our client’s best interests, we need to charge fees which keep us in business. Given the regulatory risks (cough cough) and other risks all business owners face, this means charging fees which deliver healthy profit margin without stressing out our team.

Further, our clients benefit not only financially from our advice, but they get peace of mind knowing that a competent and caring professional is in charge. By charging appropriate fees we are communicating to our clients that we are a trusted professional, that we are skilled, that we are experienced, and that we are worth it.

It can be confronting, but the prices you charge are part of your marketing. They need to be developed in accordance with the rest of your brand so your clients can get that peace of mind.

Everything we do, including pricing, needs to be in our client’s best interest.

Value of diligence

This is my favourite value. (Do you have a favourite value?)

It’s my favourite value because it combines two of my passions: epic advice + business efficiency

The value of diligence talks about the advice process within the context of your obligation to run an efficient practice.

In my opinion, this means that the value of diligence requires that you:

- Clean up your business processes so you have the capacity to help more clients (at potentially lower fees).

- Build your advice processes so they are streamlined for efficiency.

- Develop a complete pricing analysis for each team member and each service offered.

- Build out a service offering so that you can help every possible Australian in some way (even if it means having a $1 e-book, a $99 simple course, a $1,299 complex course, coaching, on-demand meetings etc).

- Learn how to price the value you deliver.

- Review your pricing in a structured way at least every year.

Now can you see why the value of diligence is my favourite value? It’s inspiring – it wants us to be not only epic professionals but efficient business leaders also!

This is all tempered with Standard 7 of the Code of Ethics which requires fees are fair, reasonable, and value for money, which is part of the broader discussion on the ethical pricing of advice.

Dr Katherine Hunt, researcher and speaker