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One of the most common ways advisors and financial planners introduce themselves to prospective clients and explain their business is around how they’re compensated. Whether it be fee-based or fee-only, fee-for-service, or any other model, this approach is backward and, in most cases, indicative of a lack of a well-defined value proposition.
Where else in the professional world do we see this kind of behaviour? The answer is pretty much nowhere.
Imagine someone was looking for legal services and the first thing out of a prospective lawyer’s mouth was that they charge hourly, a flat rate, or their pay is based on contingency, as opposed to what they can actually do and what field of law they specialize in.
Yet, this approach is commonplace in Canada’s financial services industry, compounded by public debates around billing models that pit one against another for superiority that, in the end, devolves into nothing but a comparison of total cost. It ignores anything to do with value, presuming there’s no difference in that.
To be clear, this is not a rant against any billing model. The market has a place for all of them, when applied appropriately. Nor is this an argument favouring advisors who claim they can deliver sufficient alpha in portfolios to justify their costs.
Instead, this is to say that when all we do is describe differences solely on the way we’re compensated, we’re telling clients that should be their primary focus when nothing is further from the truth. Worse yet, it frames us all as commodities.
Not all advisory and planning businesses are created equal. Just like all doctors have specialized fields, some advisors can deliver more value to certain clients based on their specific needs. Yet, most advisors fail to define who they serve and how.
When most advisors are asked who their target market is, the majority will default to “business owners, executives, and high-net-worth families.” Does this mean they only deal with people who have money? Or can they describe what specialized services or offering they have targeted at delivering value to each of those three segments specifically?
Even having dedicated pages on an advisor’s website talking about how the service offerings differ for the targeted clients isn’t enough.
Finding your niche client group
So, how does one define a value proposition?
The first and most important step for advisors is to ask themselves to which type of client can they deliver the most value. Too many try to be all things to all people, which is impossible, versus trying to be many things to one group, which is far more achievable.
The next step is to understand that group deeply. What makes them tick? What do these people need to think about? How can you help them with those needs and find new ways to provide value?
This concept is niche marketing. Focusing on one group of common people, whether by common technical need, career, life stage, background, or other identifiable factors. Cross-border workers, doctors, people transitioning into retirement, business owners looking to sell, early career professionals, cultural backgrounds – all of these are examples of different types of niches.
There are three significant advantages to this approach.
The first is that it’s far easier to explain to prospects and others what value you bring as you can get very specific. That makes every aspect of marketing – from websites to seminars and even naming your business – a lot easier.
The second is it also makes it far easier to close in on prospects who fit that niche. Suppose a prospect is interviewing prospective advisors, and one talks to them about their specific life needs and clarifies that they specialize in that area. In that case, this advisor is far more likely to land the prospect than the others, who will speak in a way that’s more general and demonstrates less familiarity with the prospect’s needs.
The other advantage is that just about everyone else, including all the major institutions, market to everyone. That’s why their sales pitches and marketing are all incredibly generic and untargeted – and makes winning business from clients in your niche easier.
Ultimately, when you market to everyone, you technically market to no one. The alternative is to focus in on one group, build around its needs, deliver value, and market heavily around providing that value to those people.
That also comes with the bonus of not having price and billing method be the first thing an advisor talks about when people ask about their value.
Jason Pereira is a partner and senior financial consultant at Woodgate Financial Inc. in Toronto and president of the Financial Planning Association of Canada.
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