Originally published on Advisor Perspectives

Conflicts with clients are not common but they’re difficult to resolve in a way that satisfies both parties.

Fees are the root of most client conflicts. Clients say they are too high and you defend them based on the value being added.

An interesting study provides insight for how to handle these (and other) conflicts.

Lessons from a negotiation

A study published in the Negotiation Journalin July 2008, explored the impact of acknowledging an opponent’s role in obtaining a concession in the negotiation.

The experiment involved a one-on-one negotiation between a student at Stanford University and an older person who the student was told was a representative of the university. The student was a proponent of legalizing marijuana. The “university representative” was actually a confederate who played the role of being opposed to legalization.

In one scenario, the confederate took a position he indicated he had formulated prior to the negotiation. In a different negotiation with another student, the confederate stated he was making a new offer in response to the position taken by the student.

The rate of acceptance of the “new offer” was higher than in the first scenario. In addition, the new offer was perceived to be a greater concession and the confederate was more liked for making it.

In their book, The Wisest One in the Room, co-authors Thomas Gilovich and Lee Ross validated this finding. They concluded, “People like to feel heard, and they tend to respond more positively when they feel their hopes and fears have received consideration.”

Practical ramifications

You can use these findings in conflicts with clients.

Let’s say your client asks about fees. Here’s a response you should consider:

Normally, we don’t negotiate our fees because we believe we can justify the value we continue to add. But you raise some good points. In your situation, your need for a high level of involvement from us on a continuing basis is less than we anticipated. Do you think a reduction of X% of our fee is reasonable?

This response shows you heard and considered the arguments asserted by your client. It makes a concession based on the merit of what the client stated. Even if the fee reduction is less than the client hoped to achieved, it’s likely it will be perceived as greater than it really was.

In implementing this strategy, keep in mind this distinction, set forth in the study: An offer accompanied by an explanation that it was made after considering the position of the other person was accepted more frequently than the same offer made without such an acknowledgment.

Sometimes, being heard is more important than the merits of what you say.