Three important factors for advisors to control their pricing

 

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Giles Kavanagh: I wanted to speak today about pricing power and wealth services. This is an incredibly important subject and it's one that's one of our core focuses. We've worked with hundreds of wealth advisors on the subject of creating pricing power, defending pricing, and expanding pricing power frankly. Interestingly, it hasn't gotten much focus in wealth services, whereas in other industries, it's almost the sole focus. Let me start with a belief here. Number one, if you lose control of your pricing, you lose control of your business. So it's incredibly important to have control of your pricing. I want to walk you through the three areas where pricing power can be created in wealth services.

Number one, quantifiable value. If you can create quantifiable, provable value, you are able to create pricing power. So if you can go to a client and say, "We've been able to expand your balance sheet by $200,000 or position you in better investments or create a better risk adjusted return, which has netted $70,000 or $150,000 in this quarter alone," you are creating pricing power. So quantifying your value is the first way to create pricing power.

The second is a very important concept called scarcity. You have tremendous scarcity as a wealth advisor. You have a limited amount of time and attention, you have a limited number of clients whom you can work with intensively. So it's very important to understand that any premium provider of services has by definition some form of scarcity. Scarcity is what creates a tremendous demand sometimes, but it also creates pricing power. Think of the art world. Some of the best artists only created X number of paintings or X number of sculptures and the art world, when they know that there are only say 20 Giacometti sculptures, it creates almost infinite pricing power. In wealth services, again, you have only a certain amount of attention that you can spend with clients. So it's a very powerful statement to say, "We have decided to work only with 80 families and individuals, or we've decided to constrain our services to 200 households." So consider where you can build scarcity to create pricing power.

Number three is differentiation. What differentiates you? So when you offer something that others in your marketplace do not offer, that can create pricing power. Let me give you some examples. Number one, if you have an accounting background and you are able to not only work on the personal finances for your clients, but also advise them on their business finances because of your background as an accountant, this is a differentiator and it should create pricing power because in the client's mind, they may be saying, "You know what, we've talked to four different advisory teams, but this one advisor is the only one who actually has this differentiated aspect to his or her background." And that is that they have a business accounting background, which could be very valuable to you. So consider where you can differentiate yourself.

So again, the three areas that create pricing power for wealth advisors, and frankly in any business are number one, quantifiable value, number two, scarcity, and number three, differentiation.

I wanted to speak today about pricing power and wealth services. This is an incredibly important subject and it's one that's one of our core focuses. We've worked with hundreds of wealth advisors on the subject of creating pricing power, defending pricing, and expanding pricing power frankly. Interestingly, it hasn't gotten much focus in wealth services, whereas in other industries, it's almost the sole focus. Let me start with a belief here. Number one, if you lose control of your pricing, you lose control of your business. So it's incredibly important to have control of your pricing. I want to walk you through the three areas where pricing power can be created in wealth services.

Number one, quantifiable value. If you can create quantifiable, provable value, you are able to create pricing power. So if you can go to a client and say, "We've been able to expand your balance sheet by $200,000 or position you in better investments or create a better risk adjusted return, which has netted $70,000 or $150,000 in this quarter alone," you are creating pricing power. So quantifying your value is the first way to create pricing power.

The second is a very important concept called scarcity. You have tremendous scarcity as a wealth advisor. You have a limited amount of time and attention, you have a limited number of clients whom you can work with intensively. So it's very important to understand that any premium provider of services has by definition some form of scarcity. Scarcity is what creates a tremendous demand sometimes, but it also creates pricing power. Think of the art world. Some of the best artists only created X number of paintings or X number of sculptures and the art world, when they know that there are only say 20 Giacometti sculptures, it creates almost infinite pricing power. In wealth services, again, you have only a certain amount of attention that you can spend with clients. So it's a very powerful statement to say, "We have decided to work only with 80 families and individuals, or we've decided to constrain our services to 200 households." So consider where you can build scarcity to create pricing power.

Number three is differentiation. What differentiates you? So when you offer something that others in your marketplace do not offer, that can create pricing power. Let me give you some examples. Number one, if you have an accounting background and you are able to not only work on the personal finances for your clients, but also advise them on their business finances because of your background as an accountant, this is a differentiator and it should create pricing power because in the client's mind, they may be saying, "You know what, we've talked to four different advisory teams, but this one advisor is the only one who actually has this differentiated aspect to his or her background." And that is that they have a business accounting background, which could be very valuable to you. So consider where you can differentiate yourself.

So again, the three areas that create pricing power for wealth advisors, and frankly in any business are number one, quantifiable value, number two, scarcity, and number three, differentiation.


What every client deserves to hear.

 

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Giles Kavanagh: There's an incredibly important sentence that every financial advisor, wealth advisor, wealth professional, deserves to be able to say with complete confidence when they are speaking to a client or a prospect. And for that matter, that same sentence is one that every client deserves to hear from their wealth advisor or financial professional, financial planner. And that sentence is very simple. And I'm going to say it right now.

But what's interesting about it is that many people can say it, but they can't say it with justified confidence. We're going to talk about what creates justified confidence behind this one important pricing sentence.

Here's the sentence. We have looked very closely at our value, and we can say with complete confidence that there's integrity to our pricing. We've looked very closely at the value that we deliver, and we could say with complete confidence that there's integrity to our pricing.

Now, what are the components of pricing integrity? This is very important because without them, you can't say this sentence with the same conviction. There are three factors. Number one, the price has to be fair, mutually fair. It's got to be fair to the clients and it's got to be fair to you and your team. Only mutually profitable relationships in doing business.

Number two, it has to be consistent. And what do I mean by consistent? Does that mean uniform? No. It means that if you had a bunch of clients who had roughly the same amount of assets and the same amount of needs and service that you provide them with, that you'd be charging the same price, basically.

So if you had a group of four clients at a room and you walked into the room, you're overhearing them, and they start to talk about your fees. Would you be scared and you are running for the door to avoid it, or would you be perfectly happy if they all revealed the fees that they were paying?

So is your pricing consistent from one client to the other and in financial services, it's surprising how much unnecessary variability there is to that.

Number three is, is your pricing transparent? And so what do we mean by pricing transparency? What we mean is that if someone asks you a question, of clients as well, I'm interested in your services, but tell me what you would charge if I were to give you 2 or 3 million to manage.

You should with zero hesitation to response, be able to answer that question within 15 seconds, just very factually lay it out. This is the price that we charge, this is our pricing schedule.

And again, it's surprising how many wealth advisors deprive themselves of that simplicity. We're not talking about actually revealing your margins, we're talking about having no hesitation in terms of revealing your pricing.

 


What makes your wealth firm's value proposition truly unique?

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Leo Pusateri: So what makes a value proposition truly unique? Let's break the three words down first. Value, we define as those services, those strategies, those solutions, that you deliver that can help someone to achieve their vision, the goals in their life, whatever it might be, right? Proposition, well, that's a proposal. So I'm proposing something to help you to achieve your goals. Well, what makes it unique? Well, our research tells us there's four specific things that makes a value proposition truly unique. 

First thing is that there's a story that supports the proposition. Why do you do what you do? How do you do what you do? You told me what you do, your value proposition, I want to know why you do it? And then how do you do what you do? How can I experience it? I want to know who you've done it for? I want to know what you think makes your proposition different? And I want to know ultimately, look me in the eye, net it out, why should I do business with you? To that point, in terms of has your value proposition been actualized, which is part of making it unique, right? That's the first thing. There's a story around it. It's supported. We call that our value ladder. There's seven questions, after that second one of what do you do? There's a series of questions you better be able to answer with the highest levels of confidence, passion, and speed. 

Second thing, you got to live this. This has got to be part of your DNA. I've always said that this should be like having an imaginary tattoo on your body someplace where this thing oozes out of you. So when people say, "Geez, what do you do?" Other people can relate it to somebody else. It's just, it's so apparent. You're living this stuff. I can feel. I can open up the zipper on your chest, and this thing as I look around your heart, there's these words that you've worked on. That's your value proposition. And the fact that you're living it really begins part of that uniqueness as well. 

The third area is that have you really made a difference in someone's life, in their family, helping to achieve their legacy, their wealth mandates, whatever it is? Can you go through that to show me that you truly have made a difference? 

And lastly, number four, can you prove it? Can you quantify it that you've made a real impact? That's what real value's all about. It's the achievement. I told you, I proposed this to you in my value proposition. What makes it unique is that what I told you I could do, in fact, happened. I can prove it. I can quantify it. 

Remember those four areas in terms of what makes a value proposition truly unique. That's what it's all about. 

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