People who provide complex services like financial planning frequently misjudge their value. It is not easy to discover, but it is impossible if you do not think about it.
There is a common failing. Advisors value services based upon their cost to provide them. Huge mistake. Customers or clients could not care less about your difficulties. They care about the value to themselves. ONLY!
Back in the 70s when I was especially interested in management and what it was composed of, I read almost everything Peter Drucker wrote. He wrote well and he had insights. I recently found some thoughts. This one is relevant here.
“Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for. A product is not quality because it is hard to make and costs a lot of money, as manufacturers typically believe. This is incompetence. Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality.”
Many advisors do not know specifically the “what is of use to them and gives them value” part of value. Even when known, most advisors fail to reinforce that with their clients. Drucker is clearly of the belief that failure to know and deliver value efficiently is incompetence.
As a consultant, the first thing I would offer is “delivery should come after knowledge of the customer value.” Some questions:
- Does price matter? Not likely. If it is affordable at all and the value that appears is greater than the price, then price should be no object.
- Does routine service matter. Almost certainly yes. If you must nag a supplier to do something routine, does that diminish your understanding of their value?
- Do they use your output as a basis for decisions? If no, then they do not value it specifically. You cannot value objectively things that you do not use. There may be other values, like my spouse does not nag me about finances, or the bank likes my financial statements. or the government did not re-assess my tax return. These are negative. The absence of bad things is a weak motivator. Positive values sell. Negative values are just hygiene factors.
You can learn what clients value and will pay for, but not by studying options like how to bind the report.
- Do you know and understand what we do here?
- If we did not provide those services to you, what would miss the least? The most?
- When you think about the services we offer and the price that you pay to get them, what would you like to see be different?
- If a stranger appeared here beside you and asked why do you deal with us, what would you tell them?
Uninformed clients have trouble answering these questions. If you want motivated, involved clients who know your value, you will need to help them both know what you do and what that value is for them.
Financial literacy involves a lot more than knowing how a mortgage or an RRSP works.
Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. Contact: firstname.lastname@example.org