Advice Market Blog

Is your advice and client value proposition – “Value for Money” ?

May 25, 2016

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Are you finding it difficult to sell the value of your services to clients?

Since the introduction of FOFA, there has rightly been increased interest in being able to convince clients about the value delivered in return for the fees and charges they pay for advice.

As this definition indicates, value for money is in the eye of the buyer not the seller, but the seller nonetheless has to be able to clearly articulate and influence the buyer’s perception of the value being delivered.

In order to help you do this, we must first go back to basics.

The real story of how you create and deliver value for your clients is intrinsically embedded in your practice’s business modelA business model is “… a story about how an organization creates, delivers, and captures value.” (Saul Kaplan, The Business Model Innovation Factory).

You create value for your clients through your Unique Value Proposition, which represents the intersection point of your clients’ problems and your solutions. The cost of delivering this value is described by your cost structure and some of this value is then captured back through your revenue streams (fees and charges). So the first key point to realise is that value in your business model is always defined with respect to your clients.

To establish a business model that works for your practice, the following two conditions must be met:

1. CREATED VALUE (CLIENT EXPECTATION) > CAPTURED VALUE (REVENUE)

This is the value equation that drives your business model’s unique value proposition. You need to create more value for your clients than you capture back. If your clients don’t get back more value (even perceived) than they pay for your service or product, they will not have enough incentive to use your services and your business model will not work.

2. CAPTURED VALUE (REVENUE) > = COST (VALUE DELIVERY)

This is the monetisation equation that drives sustainability and profits in your practice’s business model: you need to capture back at least as much value as it costs you to deliver this value or your business model also falls apart.

A for-profit business model aims to maximise the difference between captured value and the cost of delivering value.

Now let’s put these two equations together.

CREATED VALUE (CLIENT EXPECTATION) > CAPTURED VALUE (REVENUE) > = COST (VALUE DELIVERY)

As you can see, every practice needs to create client value and leave clients better off than where they started.

It follows that if you truly understand your practice’s unique value proposition, you will also understand how you are creating value for your clients, so ‘selling’ them on this value is down to how you communicate the value.

Here are six core values, first articulated in this post, that you may be providing your clients, together with some suggestions about how you can communicate the value delivered.

1. Organisation

Where practices help bring order to their clients’ financial life, by assisting them get their financial house in order (at both the “macro” level of superannuation, investments, insurance, estate, taxes, etc., and also the “micro” level of personal or household cash flow).

Communicating value may entail preparing a checklist of all the things you have reviewed with each client in order to get them better organised and then reviewing that checklist with them. It could also entail the preparation of a cash flow budget where you are able to compare the tangible financial outcome of the status quo versus the planned outcome e.g. the quantum of anticipated cash surplus under the current situation versus the plan.

2. Accountability

Where practices help their clients follow through on financial commitments, by working with them to prioritise their goals, showing them the steps they need to take, and regularly reviewing their progress towards achieving them.

Communicating value can entail documenting the review meetings and comparing the actual results achieved to the goals that had been mutually agreed in the first place.

3. Objectivity

Where practices bring insight from the outside to help their clients avoid emotionally driven decisions concerning important money matters, by being available to consult with them at key moments of decision-making, doing the research necessary to ensure they have all the information, and managing and disclosing any of their own potential conflicts of interest.

While there is a clear legal obligation to always act in your client’s best interest, communicating how you bring objectivity to the table is a valid way to prove value for money. This may be done by describing the research process you have been through (including how long it has taken) and reminding them of the number of times you made yourself available for consultation.

4. Proactivity

Where practices work with their clients to anticipate their life transitions and to be financially prepared for them, by regularly assessing any potential life transitions that might be coming, and creating the action plan necessary to address and manage them ahead of time.

Communicating value for money may be as simple as reminding your clients of the comprehensive fact-find you completed upfront and that was subsequently updated during the review process.

5. Education

Where practices explore what specific knowledge their clients will need to succeed in their situation, by first thoroughly understanding their circumstances and then providing the necessary resources to facilitate their decisions and explaining the options and risks associated with each choice.

Communicating value may be something like preparing a reading list or details of online training and resources the practice believes will help educate each client and providing this to the client to action and later validating that each client has accessed the resources. It may also consist of providing access to online educational resources owned by the practice and regularly reminding clients how they can access them.

6. Partnership

Where practices attempt to help their clients achieve the best life possible by working in concert with them to make this possible, by taking the time to clearly understand each client’s background, philosophy, needs and objectives, and then working collaboratively with them, offering full transparency along the way about costs and compensation.
While much of this is already embedded in legal obligations and documentary requirements, it doesn’t hurt to remind your clients of the processes involved to get to partnership ready status and to document known financial outcomes such as taxes saved, additional returns generated, increased retirement savings realised, etc.

How do you sell the value for money you generate for your clients?

How’s your client retention in your practice is the third (part two) in a special five-part series which has been authored by Ray McHale, Founder of Marketing-Based Assets International Pty Ltd and in collaboration with Spiros Christoforatos, Founder of AdviceMarket . Both Ray and Spiros are passionate about providing businesses with the tools, guidance and support required to ensure they are thriving, robust and dynamic entities in the ever evolving space that is financial services.

Ray McHaleRay’s mission is to make sure practices (just like yours) become very successful by generating valuable insights about their client relationships. He helps practices identify and listen to their clients, measure financial impact and take targeted action to maximise the value they create. His company provides consulting services, on-line resources such as Valuiza and coaching/mentoring services. Simply visit www.valuzia.com to find out more about Ray and how he can help you.

Spiro’s ambitions, through his AdviceMarket platform, is to make it easy for consumers to connect with advice professionals and to provide advisers with another way to grow their personal brand and expertise to an audience that is looking for verified and socially proofed advisers. Ultimately the goal is to contribute to increasing financial literacy among the community and to encourage all Australians to seek advice. If you’re an adviser and you want to find out more visit https://www.advicemarket.com/adviser-signup/

By Spiros Christoforatosadministrator