A client of mine, Brian, stared at me, his mouth gaping open, when I explained that the total of the fee discount "exceptions" he'd made amounted to $85,000, 10% of his current gross revenue. He'd hired me to help him grow his firm while balancing his lifestyle goals, so this insight was significant.
Brian is not unusual; many advisers make seemingly insignificant exceptions on their fees and minimums. Brian didn't mean to undercut his success, he simply didn't realize what he was really doing, or, more importantly, why he was doing it. He consistently compromised his potential because he was afraid the prospect would say no. When forced to choose between an instinctual fear of rejection or holding to the standards that would help him achieve his goals, he blinked.
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Understanding why Brian blinked, and how we each suffer from this self-inflicted mental malady, is critical to achieving our full potential.
Brian's response to the first prospect asking for a fee discount was utter discomfort. He felt tense and anxious, a bit panicked, and was mentally scrambling for a way out. Why? When faced with the discount request, Brian's primitive brain perceived a threat.
The limbic system, the oldest and most primitive part of our brain, has but one job: survival. When faced with anything resembling a threat, its job is to take charge and make sure we get out alive. It hits the fight or flight button, which kicks us into auto-pilot so we don't spend valuable life-saving time thinking about how to respond.
Many advisory firms suffer from conviction and consistency challenges. Having conducted hundreds of analyses over the years, I've seen a lack of consistency in fees charged (exceptions become the rule), lack of client base profitability, and a failure to enforce fees and minimums. Without purposeful business practices and the conviction to adhere to them, advisers are suffering from a self-inflicted performance disadvantage.
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This limbic reaction leaves many advisers reacting to situations instead of responding based on purposeful business practices. What most fail to realize is that there is a very real, and often significant, cost for doing so.
Brian could have been prepared for this scenario in advance and confidently said, "Our fees aren't the least or the most expensive. Our clients will tell you they're more than fair for the value we deliver. They enable us to serve our clients well, while practicing good business. If you'd prefer to work with someone who charges less, we wish you the best of luck in your search for the right adviser." Or he could have shared that the firm didn't reduce its fees because he didn't want to compromise the service delivered to clients.
At a minimum, he — like all of us — can learn what's driving his behavior and take back control. As simple as it sounds, taking a few deep breaths gives us precious time to opt out of the automatic bypass around our more modern cognitive processes. This would have given Brian the mental space needed to pause and determine a logical response to the threat — which he could quickly recognize was not really a threat, but rather a request he could politely decline.
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Imagine that I came to your office and put $100,000 on your conference room table, and told you I would do so every year as long as you followed agreed upon business practices. Now imagine that every time you compromised one of those practices, I took back $2,000. Odds are you would pause, reflect, consider your situation thoughtfully and compromise less often.
Why? Because what had previously been an intangible, hidden cost has suddenly become tangible. You can now see the thief that stealthily infiltrates your business — via your brain — and robs you of your potential. Only with analysis can we really know the cost.
Our thinking — whether realized or not — is what really determines our success. So the question this month is, who's really in charge, your purposeful business practices or your primitive brain?
Stephanie Bogan is the CEO of Educe Inc., focused on helping entrepreneurs build wildly successful businesses and lives they love. Contact her at [email protected].
