Are You Giving Your Most Valuable Asset Away to Prospects for Free?

Nov 12, 2013

Last month, notified its customers that after a decade of offering free shipping on orders over $25, it is upping the minimum to $35. See this recent article.


For a firm that spends $1.8 billion on shipping, I guess it was time to revisit their pricing model and review the cost of the service. While I don’t think the announcement will stop the almost weekly trip to our house by the UPS truck, it did get me thinking about pricing, benefits and the cost of doing business in an advisory practice. For example:

  • What work should you do before a prospect says yes and turns into a client?
  • How much should you reveal about your proposed planning and/or investment processes before the client commits?
  • Have you reviewed your pricing and costs in the last 10 years?

Time is money – or is it?

As I have said in the past, I believe what an advisor really sells more than anything else is their time. We only have so many hours in the day, and how we choose to allocate that time is incredibly important. Our time is our intellectual property, and in some cases, we have to give away some of our time to work with a prospect to show how valuable the mutual relationship can be. But how much do you give?

Over the years, I have heard about all sorts of ways to transition a prospect into a client. What I typically hear is a pitch on investment products in the “My portfolio would have done better than yours” mindset. Of course, the with the hindsight of what the market actually did and access to tools like Morningstar to pick funds in a rear view mirror, it is easy to create a portfolio of winning funds that would outperform anyone.

I have also seen many advisors create a fairly comprehensive financial plan, showing all sorts of analysis and projections, giving the confidence in their future. The plan is “thrown in” as a low-cost or free service, in the hopes that the advisor will get to win the assets. Recently, I met with a firm that did just that. They spend hours manually creating a financial and retirement plan for a prospect. They dove into the prospect’s cash flow, looked at titling and did a beneficiary review; they even did a full estate review. This firm spent countless hours organizing and creating a full blown plan for the prospect, only to have the prospect say a firm “Maybe.”

The prospect loved the plan but wasn’t ready to commit to transferring the assets. The firm’s business model was that they charged so little for the plan, that unless the client moved a significant chunk of assets over, they lost money. I find it interesting that what the client valued most is treated as freebie and what they would have been charged for was the commodity. The firm gave away its most important asset — its time.

Map value to costs

As we start looking to 2014, many of us are starting to rough out a business or marketing plan. The typical plan takes a look at what you did in 2013 and puts together some ideas and projections around growth and revenue. This year, why not take some time to look at your pricing? Ask yourself:

  • What does it cost me to create a plan (investment or financial)?
  • Am I being compensated for my intellectual capital?
  • What do my prospects (and clients) value and how am I pricing my services?

I think the last question is the most important. If you need help, do a client survey or ask your advisory board. What I think you will hear is that there is a disconnect between your pricing and what they value. I think you will hear that they value your time, attention, and being face-to-face with you when discussing goals and the future. They probably don’t value your rebalancing of the portfolios, or your ability to scan the universe of mutual funds and ETFs.

Where the rubber meets the road

So what do you “show” prospects who you meet if you don’t do a full financial plan for them, or create the winning sample portfolio? Show them you — the real you.

  • Meet them first in a non-threatening location, a place that doesn’t scream “I’m going to sell you.” If it has to be at your office, meet in the conference room.
  • Talk to them about what they want out of the relationship, what their issues are today and what they are worried about in the future.
  • Ask them to share experiences with other financial providers (good and bad), so you can learn from that.
  • Understand your value proposition and make sure they hear it.
  • Offer to do a review of their plan and their investments. The key is to provide observations, not answers. Your job is to make them feel comfortable and confident. Your job is not to provide all the answers, until they become a client.

Take a look at your business plan for 2014. Have you reviewed your pricing? Are you giving away too much?

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John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

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