Three important factors for advisors to control their pricing

 

Read The Transcript Of The Episode:

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.