The 3-Step Pricing Fix Most Firms Miss
Updated: Sep 15
Most advisors approach pricing backwards. They jump straight to talking about fee increases before they've fixed anything underneath.
I get the instinct. Raising fees feels like the fastest path to more revenue. But in my experience, you can't remodel a house before you repair the foundation, and pricing works the same way.
Here’s the three-step pricing fix that I use almost every time.
Step 1: Raise the floor
The fastest way to improve profitability is raising your minimum fee.
Why? Because that's usually where the biggest inconsistencies are hiding. Pull up your client list and I'd bet you'll find clients with similar complexity and nearly identical service models paying dramatically different fees. I see this in almost every advisory firm I’ve worked with.
Pricing is usually what's driving that gap, and it's typically the easiest thing to fix.
Understand the cost to serve clients in each client segment, receiving the same service model, then mark it up by your desired (and deserved) profit margin.
If clients don’t meet the minimum, charge a one-time catch-up fee to meet minimums, demote them by tier, or make a transition plan.
Step 2: Limit exceptions
Every advisor has them. Friends, family, legacy clients, the children of top clients, the neighbor discount you gave in 2015 and never revisited. The list goes on.
Unlimited exceptions with no plan to review them can wreck your economics over time.
Consider creating a cap. Maybe each advisor can only maintain a limited number of discounted relationships, new exceptions require approval, and legacy pricing gets reviewed annually. Something structured like that protects your culture and your economics at the same time.
For multi-advisor firms, any clients over the cap of e.g. 5% of client exceptions don’t receive payout. That is perfectly fair to stop founders from underwriting any individual advisor’s charity.
I know what you’re thinking… If I don’t say yes to my top client’s children, won’t they disengage? Short answer is no. Clients will respect that you provide specific services to clients like them.
Step 3: Raise the ceiling
Only now should you focus on fee increases, because you've already stopped the bleeding. Once the floor is solid and the exceptions are controlled, every pricing decision from here compounds instead of just patching a hole.
Do me a favor. Don’t just choose an arbitrary benchmark you find on an industry study of hundreds of advisors. Fees are a business strategy and should be done with the utmost consideration.
The best way to set an advisory fee is by looking at objective evidence. Fees should be based on factors such as:
Cost to service
A desired or needed profit margin
The current ideal client and client mix
An assessment of the value of the service model
Firm goals and other business needs
Want expert help? Schedule a complimentary advisor profitability review. I've been helping advisors feel confident and systematic about their fees for over 14 years.
Capacity is telling you something
When advisors hit a capacity wall, the first instinct is usually to hire, add technology, or take on more staff. Sometimes that's the right call. But often, a full calendar with underwhelming profitability comes down to underpricing dressed up as a capacity problem.
If your calendar is full and your margins still aren't where they should be, pricing deserves a closer look before your org chart does.
Better clients require space
The best opportunities happen because you've created room for them. That's why the highest-performing firms make a habit of reviewing client profitability, service alignment, transition opportunities, and pricing consistency on a regular basis.
They're trying to serve the right people exceptionally well, and that takes space they have to create on purpose.
This service and attention is what advisors can charge a premium fee for (and be proud of).
Your pricing strategy
Don't start with fee increases. Start with fee discipline. Even if it’s hard. Even if you don’t want to.
Raise the floor. Control the exceptions. Then raise the ceiling.
That's how sustainable pricing power actually gets built.
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