27 Aug Why potential clients undervalue the work of financial advisors
Do you know why potential clients consider you too expensive?
As the dust continues to settle post-RDR consumers are adapting to a fee-only landscape. Though your existing clients are comfortable with this model, refugees from the land of commissioned sales don’t feel the same way. Even for those who have never had a financial advisor the costs often seem high. Why is this?
Consumers find it difficult to value your service because they have a poor mental price anchor. When deciding whether something is expensive or cheap we use past experience and a “comparable” to determine fair value. Without a price anchor it is extremely difficult to value anything.
Most people have never bought financial advice and they probably don’t have too many friends who have bought it either so they often look at the fees an accountant or lawyer would charge to judge fair value.
Unfortunately, you probably have a completely different charging model to a firm of solicitors. How many businesses do you know that charge people on assets under management? Not many. To get potential clients to happily pay your fees (and value your work) you need to break the link between your business and their faulty price anchor.
Two ways to fight faulty price anchoring
Compare your business with something more expensive – The obvious thing here is the time, cost and knowledge required for the person to do their own financial planning. With all your years of experience it would take even the most dedicated student many more years to reach your level of knowledge.
Don’t just say I’ve been doing this for X years so I am very experienced. Calculate it to the Pound. You don’t need to throw this figure in their face, but it is good to have in your back pocket. At the very least you should know how many hours your service saves them from doing it themselves (if they even could).
Don’t do business like an accountant or a lawyer – On a psychological level if your potential client’s experience of doing business with you is different than with another business then they wont’ compare prices. Just like you wouldn’t compare the prices of McDonald’s and a fancy restaurant.