Rob Carrick Is Right

Writing that headline was difficult for me.

I have many mental icons that have stood the test of time.  I think of them as life simplifying assumptions.  My youngest daughter thinks they are prejudices.  We might both be right.

One of them has served well for a long time.  Rob Carrick of the Globe and Mail writes financial stuff that, while narrowly true, fails to address important and fundamental matters.  I must revise this icon as it has now been shown to be not universally true.

On July 14 the Globe published a piece by Rob entitled “Why Won’t Canadians Pay For Financial Advice?”  I know people do not follow links.  Make this one an exception.

The article begins,

It’s time for Canadians to get over their hang-ups about paying for financial advice.

I accept some blame for the misunderstandings out there about the cost of advice, and maybe some other financial writers will, too. The net result of our interactions with people is the emergence of a cohort that believes advice just gets in the way of them paying the lowest possible fees.

There is a common misunderstanding among the careless and the poorly educated cohort.  It is one that I have written about many times.  The discrepancy between the real value of advisors and the perception of that value arises because advisors make little effort to make the clients aware of what it is that they do.  If people do not know what someone does, they will assume it’s easy and/or without value.

That misinformation fault lies with the service provider, not with the consumer and not with financial writers.

The underlying problem is this.  The price of something says little about the value of that something.  The balance we should address is value versus cost.  Price is part of cost, but it is never the entire description.  Regardless of price, who would use a factory second  parachute?

By reducing price people frequently accept other costs that are less obvious.  Things like:

  1. Who can be my conscience and keep me on track?
  2. Who can show show me alternatives?
  3. Who can help me calm my emotions?
  4. Who can record and review my transaction and suggest revisions?
  5. Who can tie in other subjects?  Like income tax, wills and family law.
  6. Who can do the arithmetic to determine the appropriate amount of savings?
  7. Who can help communicate my ideas and plans to other?  Like lawyers, partners or children.

Advisors are a bit like baseball umpires or basketball referees.  When they are doing their best work, they are near invisible, which leads to a problem.  People cannot see the value of the ones who do the best work.

If people are unhappy with your price, it is because they cannot see your value, so periodically advisors should make what they do visible. Easy enough.  Just do it.

Show and tell or suffer the consequences.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  866-285-7772

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