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It’s often said we get what we pay for. That implies the more expensive a product is, it should offer more durability or come with more prestige than a less expensive equivalent. Likewise, a higher-priced service should be better than the cheaper alternative.
Some companies execute on all fronts. For example, the automotive world where dependability is paramount and car buyers often make decisions based perceived prestige, luxury band Lexus ranks first in terms of reliability. So while Lexus vehicles aren’t cheap, buyers are getting what they’re paying – dependability and an esteemed brand.
There are lessons in the above for advisors. First, if a practice is going to charge higher fees than a competing firm, it’s best to make sure that higher price point brings with elevated service and clear values adds because clients are fee-sensitive and that will never change.
Second – this is the encouraging part – studies indicate that investors that pay for financial advice feel more confident than their go-it-alone counterparts.
Advice Breeds Confidence
It should go without saying that the recipient of high-quality professional advice, i.e. clients, should feel about their financial futures. Recent data from Comparison Adviser confirms as much.
“The data above demonstrates a clear trend, with the percentage of individuals who’ve paid for financial advice increasing with each age group,” according to the research firm. “Specifically, the number jumps sharply from 5.6% of those under 30 to 20.8% of people in their 50s and, perhaps most significantly, 47.9% of respondents 60 years and older.”
The above table, courtesy of Comparison Adviser, is a great tool for advisors to highlight to young prospects the value of credible financial advice. Said another way, the source of advice matters and the more credible it is, the greater the chances are the young client emerges as confident.
Interestingly, it is younger clients that might see more reason to have a sound financial plan in place. They’re more pliable and less sated than their older counterparts.
“Younger clients may be more receptive to the advice they’re given, buoying their confidence level. Meanwhile, an older client who’s spent years dealing with financial challenges may not feel as sure of their plans as their younger counterparts,” adds Comparison Adviser.
Understanding Sources of Lost, Increased Confidence
How financial confidence is formed or lost is important in the equation, too. A client that has recently added an unexpected child to the family or been laid off could be dealing with elevated worry, which can breed lost confidence.
Conversely, someone that just landed or new job or a big raise is probably feeling more confident. Same goes for a client that is on the receiving end of a nice inheritance. Those are just a few examples, but it’s clear advisors are integral to helping financial confidence increase.
“After even an initial meeting with a professional, an individual may walk out with more clarity than they had before,” concludes Comparison Adviser. “This value manifests itself in the data above, with respondents who’ve paid for financial advice in the past being on average about 16.5% more confident than those who haven’t paid for financial advice in the past.”