Imagine grabbing a cab.
Picture yourself sitting on the back seat and looking at the taxi meter. Don’t you hate watching the taxi meter going up, knowing that every extra inch of the way is costing you?
Why do you hate this?
It’s because of the pain you are suffering. Not the physical pain of course, but rather an activation of the same brain areas associated with physical pain.
Now, picture your client paying an hourly financial planning fee. Is it any different?
Spending money hurts. Literally.
Your clients are not weighing their current gratification vs. future gratifications. They experience an immediate pang of pain when they think of how much they have to pay.
So what if you could remove your prospect and client’s pain of spending? Do you think it would benefit the number of people you want to serve?
The question is: how?
The Real Reason Why People Don’t Buy Financial Planning
You see, when we experience pain, a certain region of our brain – the insular – lights up under a brain scan. And not only for physical pain. But also a psychological pain.
So, what’s psychological pain?
Well, for example, spending money is.
It’s what social scientists call the “pain of paying”. This is the unpleasantness associated with giving up our hard-earned cash, regardless of the circumstances. It turns out that the pain of paying has two interesting features.
First, and most obviously, when we pay nothing we don’t feel any pain of paying. Second, and less obviously, the pain of paying is relatively insensitive to the amount that we pay. This means that we feel more pain of paying as the bill increases, but every additional dollar on the bill pains us less! This diminishing sensitivity to the pain of paying means that the first dollar we pay will cause the highest pain, the second dollar will cause us less, and so on, until we feel just a tiny twinge for, say, the forty-seventh dollar.
Let’s take this wisdom back to our financial planning service.
If you’re an ‘hourly-rate financial planner’ or a ‘monthly-fee financial planner’, what do you think happens when people have to pay you several times?
Every time they have to pay you, you let people feel the pain of paying. It doesn’t matter if the price is low, they still feel a psychological pain.
It gets worse.
Because researchers from Carnegie Mellon, Stanford, and MIT were able to show that activity in the insular can PREDICT whether people buy or not …
In the trial, participants first saw a product, then saw its price, and finally decided whether or not to purchase it.
As soon as participants saw the price, the insular got active… And activation was much greater for the products that people eventually didn’t buy, than for the products they did buy.
So when people don’t buy, it’s not just because they’re evaluating your service and thinking about what else they could do with the money, it’s also because they experience the IMMEDIATE psychological pain of spending!
And that proves it:
How to Make Buying your Financial Planning Service Hurt Less
First things first: why does buying your financial planning service hurt?
Well, the pain of spending stems from the fact that your financial planning service is an intangible service.
It’s not a product, which is tangible. It’s not insurance, which is tangible.
Financial planning, by contrast, is intangible. In fact, financial planning does not even exist when people buy it from you. So, your prospect buys a service with no guarantees – and because of that, he buys uncertainty.
- The uncertainty that your service doesn’t live up to your prospect’s expectations.
- The uncertainty that it may be a big waste of time.
- And even worse, the uncertainty that they just made a wrong decision that cost them a lot of money.
So, what do you need to do?
You have to remove the uncertainty. Because when you remove the uncertainty, you increase the number of people who want to buy your service.
How do you do that?
Well, here’s the secret right off the bat:
Why Ownership Works (Backed by Science)
Why does the seller of a house usually value that property more than the potential buyer? Why does the seller of an automobile envision a higher price than the buyer?
In many transactions why does the owner believe that his possession is worth more money than the potential owner is willing to pay?
There’s an old saying that goes like this: “One man’s ceiling is another man’s floor”.
Well, when you’re the owner, you’re at the ceiling; and when you’re the buyer, you’re on the floor. In other words: the ownership of something increases its value in the owner’s eyes.
Ownership pervades our lives and, in a strange way, shapes many of the things we do. And since so much of our lives are dedicated to ownership, wouldn’t it be nice to make the best decisions about this? Wouldn’t it be nice, for instance, to know exactly how much we would enjoy the service of a financial planner?
Unfortunately, this is rarely the case. People are mostly fumbling around in the dark. Here’s Dan Ariely again:
- People fall in love with what they already have. Ever sold a house? Then you probably remember the moment when you put the “For-Sale-Sign” in the window. You probably also remember the fine and special moments in that house. A warm glow of memory washes over you and the house. Now, I don’t think it’s very likely that people get a warm glow about their financial advisor, but still, it’s hard to say goodbye to him, because most of the time it feels fine to stay put;
- People focus on what they can lose, rather than on what they may gain. When we put a price on our beloved house, we think more about what we lose (the fine memories in the house) than what we will gain (future fine moments in the new house). Likewise, your client focuses on the good moments his current advisor helped him with some difficult money-issues.
- People assume others will see the transaction from the same perspective as they do. We somehow expect the buyer of the house to share our feelings, emotions, and memories. Or we expect the buyer of our house to appreciate how the sunlight filters through the kitchen windows. Unfortunately, the buyer of the house is more likely to notice the strip of black mold in the corner. Just like many new financial advisors notice the “gaps” in the previous financial advice, rather than the good parts.
Still, the question remains: how can you let your prospects ‘own’ your service while not letting them feel the ‘pain of paying’?
Here’s the answer: You give them a rock solid guarantee.
And I know what you’re thinking: I can’t give any guarantees about the outcomes of my financial plan!
But that’s not what I mean. I mean a type of guarantee that transfers the uncertainty from the prospect to YOU, the financial planner.
Like when you don’t deliver the value as they would expect, they won’t be out of pocket.
Just think about Zappos, FedEx and – for the Dutch readers – Coolblue. These famous companies use the perfect guarantee for their customers. And they’ve built billion dollar businesses…
Here are 4 Types of Guarantees You Can Use
Derek Halpern (founder of socialtriggers.com) once wrote a post about guarantees. And it got me thinking how to use guarantees in our financial planning service.
And what’s the irrational thing you should know about guarantees?
You might think that guarantees with the least conditions are always the best. But that certainly isn’t true.
Research shows that if customers are uncertain about the outcome of using your service until they experience it, conditions actually make your offer more credible.
So, let me walk you through some types of guarantees you can use with your financial planning service.
Guarantee #1: The Standard Money Back Guarantee
Offering a money back guarantee doesn’t seem possible for our financial planning service, right?
I’ll tell you in a minute how to do that, but first remember this:
A simple money back guarantee won’t make your service stand out from your competition unless you’re the only one who is offering it!
When I started as a self-employed financial planner, I’ve implemented this in my own business. Here’s how I did it (sorry about the dutch language):
So, what happens here?
First of all, what I’m doing here is adding a little context.
You see, the most expensive option (the offer I don’t want people to choose) is seen as a price-anchor, making the other two options appear cheaper – and the cheapest option is a real no-brainer. The effect is that people rationalize purchasing the less expensive option by avoiding the most expensive option. You can read psychological evidence here.
But it’s not the only weapon in my psychological armory.
I’ve also added a money back guarantee to my € 195 option. People get a € 195 consultation with me. And if they aren’t satisfied, then they can easily use the money back guarantee. No strings attached.
Guarantee #2: The Extensive Money Back Guarantee
If you want to go crazy, you can do what Zappos does. They offer a 365-day return policy.
There’s a huge benefit for you when using this strategy. Just think about what I told you about ownership a couple of sentences ago and you’ll know.
And by the way, you become really, really remarkable when using this strategy. And if you want to know why being remarkable is rewarding .., just click here.
(One side note: if you offer this type of money back guarantee, please put that money aside …)
Guarantee #3: More than Money Back Guarantee
Put yourself in your customer’s shoes for a moment. When they decide to hire you, they’re not only risking the money they spent. They’re also investing time and passing up other opportunities.
So, in reality, if they don’t like your service, they still suffer a loss, even if they get their money back.
As a clever financial planner, you can adjust the payoff of your guarantee and offer MORE than money-back to solve that problem…
You can say something like this: “If you aren’t satisfied, you get your money back AND we’ll guide you to other financial planners who can better serve you”.
Promoting other financial planners?
Yep. You’re right. Again, try to stand in your customer’s shoes. When you are offering a guarantee like this, you’re actually saying: “We really care about YOU (and not about our Assets under Management).
Guarantee #4: The Minimum Result Guarantee
Instead of a vague satisfaction guarantee, it’s always better to be clear and specific about the results customers can expect. And that’s what a minimum result guarantee does.
Now, I know that offering this type of guarantees can be scary. I mean, what result are you really delivering after say one year? You can’t say something like: “You’ll reach our lifetime financial goal in one year”.
So, what are the alternatives?
Think smaller. Look at the results you achieved with your previous clients. And ask yourself: what’s the minimum result I can guarantee? Maybe it’s something like:
- Peace of mind after only one conversation
- No financial-product-selling
- A conversation about yourself first, and your finances second
Now, I understand that sometimes it can be really difficult to actually go out and implement these kinds of somewhat unusual guarantees, especially if you haven’t tried it before.
That’s why I’m offering you an extra PROVEN guarantee I’ve successfully implemented in my own service.
Copy and paste this guarantee, and you’ll ease the pain of paying. I’ve created a FREE pdf with The Simple, Yet Rock Solid Guarantee that Makes Your (Hourly) Fee Feel Less Painful To Clients
The only thing you have to do is to answer this question: What guarantee do you (want to) use in your financial planning service?
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