I teased this one a little bit last week and was honored at the engagement I got from #financialadvisors and #financialplanners on the post. It is a fact that the majority of the advisors using the AUM (assets under management) business model (charging a percentage of the assets) aren't worth what their clients are paying them. The Wall Street Journal did an article highlighting how easy it would be for clients to 'beg the question' when it comes to whether or not what they are paying is fair: The Problem With How Many Financial Advisors Set Their Fees
I know, I know...caveat emptor Mike. Yes, the clients are agreeing to the fees. Do they really understand them? The answer is maybe...but, what happens when they do some math and figure out what you are really charging them?!?
Note: there are great advisors/planners out there using the AUM model and actually delivering value...to include all my coaching clients. They are the people I am trying to reach and support with this weeks newsletter (and quite frankly, all my content). The people that are going to defend charging AUM without acknowledging the serious issues with it are folks I am not going to persuade.
If I was still an advisor looking to add and retain high value clients I would have one question that anchored my prospecting strategy when competing against the current advisor:
"How much are you paying your current advisor per hour?"
- How does that question land with you?
- What would your answer be to your current clients if they asked it of you?
- Would you be comfortable with your answer?
For some of you, there would be no problem at all. This would be because you have a crystal clear value proposition for your clients and, in most cases, it would be right on your website. Remember, you aren't selling to other advisors...you are selling against them...to clients.
The number one question any prospect has is "what is this going to cost me?" Up until you answer that question clearly and demonstrate that you are worth the cost...they really aren't listening.
What about your clients when they are trying to help you by providing #referral introductions? If they don't really understand how you are charging them and that you are obviously worth it in tangible and easy to explain ways...you are going to be losing more referrals than you win...before you even know you were in the game.
The number one question any client has when thinking of introducing you to a friend, family member or business relationship is "will this help or hurt my relationship with them?"
If you are easy to refer to, by looking different, they are going to have a much easier time answering that question and will inevitably refer you more. If you look like everyone else, even if they really like you, they will have more friction in deciding to introduce you and then convincing their friend to meet with you.
That's right. You will be losing more than you realize because your clients are going to have a harder and harder time explaining why you are worth meeting if you look like everyone else (AUM). On the flip side, I know some advisors that are pricing their services absent the AUM model and they are flat out killing it when it comes to customer acquisition. One of them is actually referring out more clients to other advisors than he is accepting himself.
If you get anything out of this weeks post I hope it is this: How you set your pricing (and how your clients perceive it) are becoming more and more important.
You need to look different, even more so if you want to remain referable, so that you and your clients have an efficient introduction and #sales process. Next week I am going to explore the process of evaluating and implementing a change in your business model (pricing) so that you continue to stay ahead of the competition.
If you charge the same way everyone else does...you are a commodity and will be referred and evaluated as one.
I hope this has been helpful and inspiring. Please share this with friends/colleagues of yours in the #financialservices industry and others in sales. I would be honored to see your comments, questions and direct messages about how we can continue to evolve and grow this great industry.
Can I Borrow Your Car?
Related: Success, by Necessity, Must Be Constrained: How To Succeed and Not Hate Yourself Later