“So Mr/ Ms Adviser, let me just clarify this a little”
“If I understand right, the level of service I’m going to get is defined by how much money you receive from me, is that right?“
“So my question is; how exactly does this relate to what I actually need?”
Whoops. We’re on dangerous ground here.
Then again, we kinda know now that the Platinum, Silver, Gold thing is as flawed as they come, right?
The history is important on this one.
It explains the ‘why’.
How Advice Service Offerings Came To Make No Sense
In the not too distant past, most advisers were paid commissions.
That meant they didn’t actually set the fee they were paid for their services. Instead, their revenue was defined by a third party; the product manufacturer.
I know. It seems crazy, doesn’t it. That a stand-alone, entrepreneurial business would allow their profit margin to be arbitrarily defined by whatever the product provider decided to pay them. However, believe it or not, that was the game.
In that world, the fees paid by clients were tied to things like assets, annual premium paid and other factors.
In that world, it made sense to look at the data around what revenue was being received, then rank clients in order of how much was received on behalf of each.
From there, it was pretty simple to make sure that you took extra special care of those who paid you the most, with descending levels of care down to those who paid little.
Don’t get me wrong, there were positives. The model ironically was the perfect socialist vehicle. A true Robin Hood model whereby those who needed help saw the cost of advice subsidised by those who didn’t at that time and, in particular, those who could afford to pay more due to (usually) their wealth.
Ironically, this framework was then dismantled by a left wing government concerned about the unfairness of it all (but I digress, and politics really isn’t my bag).
Slowly though, commissions have disappeared, followed by the slow march away from asset-based only fees (not including hybrid) The service model though has endured, in many forms.
Platinum, Gold, Silver.
AA, A, B, C, D.
Care, Care Plus, Private.
You know them; the combination of same-same but different packages, all based upon that core principle that more money = higher service.
It’s become a bit irrelevant though.
The equivalent of insisting Warren Buffet buy a Bugatti Veron, instead of the mid-range Cadillac XTS he’s decided he needs.
Or refusing to give Conor McGregor his Centurion card because the Mayweather money hasn’t hit his bank yet.
It’s flawed thinking from a status quo that has long gone, yet still it endures.
Here’s the other issue.
Missing the Mark 85% of the time
According to research from the US, there are three categories you can lump most advice clients into.
The first, and the one we’re probably most familiar with, are Delegators.
For various reasons, these are clients who have decided they don’t want to be the ones to manage it all. They are happy to hand over the reins to the right professional with the right skills, and pay the fees needed, so they don’t have to do it.
These are the ones that our industry is geared up to deal with. They’re the ones advisers talk about when they describe their ideal clients as “Those who take advice”.
(By the way, try turning that into a Facebook audience. Grrrr.)
Here’s the thing. They’re the minority (and that there is insight into why the needle on the number of Australian’s getting advice hasn’t shifted much from 15% in the last decade).
As an industry, the truth is we’re mostly a one trick advice pony, catering for these guys, and mostly ignoring the other two (to our peril and Silicon Valley’s glee)
The second are the Validators. It’s not they don’t want advice. It’s more they’ve got a plan, and just want to bounce a few ideas off someone who knows more, perhaps get some very specific guidance.
Do they want “holistic” advice? Are they in the market for some “peace of mind”? Do they want to get clear on their “life objectives” (as colonised by AMP in 2016 apparently)?
No. Not really.
Maybe one day, but right now they just need a little help, not the prospect of a $3k+ SOA fee and another few K a year pulled from super to pay for some assemblance of appointments, reports and invitations that they’d never buy on a website.
Then we have the Self-Directed, arguably the most worrying of all.
Some of them have got it sorted. They’ve read the books, understand the logic, have developed the know-how and are very, very capable of creating their own wealth. They’re cool headed, analytical and thinking long term.
The rest – how can I say this nicely? – are like babies playing with a loaded gun or, even worse, Donald Trump playing the game of international diplomacy.
They’re full of confidence. Ready to act. Sceptical of anything that smells of “expert”.
They’re also fodder for the spruikers, “the-answer-is-SMSF” mob, dodgy accountants, “my mate has this opportunity” friendlies, hot stock pickers and anyone else who has worked out the pain/ promise marketing equation but not the “actually deliver value” part.
They don’t need your “advice”.
They do need something though.
They need information.
They need clarity.
They need to be slowly exposed to the weak links in their grand plans, but they’re not going to pay $1,000s until this has all happened.
The So What Crew
Perhaps at this point you don’t care.
You’ve got a business that happily services the wealthier amongst us, easily charging 000s for your services.
You, understandably, would likely be less interested in the other end of town, and I get that.
I am not hear to persuade Delegator-only businesses to change their beliefs.
Niching is important. Finding your sweet spot is key. Knowing your value is important. Working the way you want with the people you can help is vital.
It’s just that when advice goes mainstream and becomes something everyone gets, understand that your model may miss the chance to be part of that great movement toward solving people’s money problems en masse.
You’ll remain a boutique business looking after “established” people’s investments, and not within the ranks of progressive business solving the ongoing financial obesity crisis that’s eating the world.
It’s completely your choice.
The Ascending Advisory Model
If you’re still reading after that last paragraph, I’d guess you’re looking for the answer.
So, here it is.
You’re going to build a progressive service model that can help more people.
An Ascending Advisory Model that moves the right people slowly (but surely) toward the right level of engagement with advice.
What is more, you’re going to be able to do it profitably for different client types with different mindsets, at different financial stages, via different servicing models and differentiated packages.
You’re going to do it by realising that there are only three packages you need to offer.
Your DIY offer
For self-directed clients with the knowledge / time and low levels of complexity to self-manage. It’s an offer where they take the lead on ongoing monitoring of their situation, notifying you when assistance is required. You’ll remind them of what they need to keep an eye on and monitor, and events that might require the to reach out to you for help. You’ll keep them informed via your educational & market communications, plus online reporting through your portal, enabling you to lay out a system to follow to keep things flying right. Your team will perhaps check in every now and again (either electronically or personally) to make sure they’re not making a balls up of it, and provide them with the ability to even ask a few questions now and again (via email). If they need more, you’ll offer them your services on a User Pays basis, charging for new advice when it’s needed and Strategy Reviews when requested. It’s affordable support on an “As Needed” basis, without the need to start from scratch when help is needed. If all goes well, they should be able to manage things okay within your high level stewardship. If not, you might suggest they consider…
Your Done With Your offer.
This is your partnership program and how those seeking to work with experts can afford to access advice more easily. As part of your initial scoping, you’ll agree which areas of advice will be managed by each party, including clear mutual action items over the course of the year. Essentially, you’ll share the work, with them doing the things that are easier for them to do cheaply (cashflow, getting estate planning in place) and allowing you to do the more complicated stuff that is worth paying for to get right. They’ll get access to your advice team (though maybe not your mobile number), plus an Annual Strategy Review to ensure effective co-management and an optimal ongoing plan. You’ll deliver education & support, inclusive of some advice documentation (ROAs) and subsidise any new advice costs (SOAs). The outcome will be mutual management at an optimised price point. Ideally, this will result in not only hitting goals along the way, but also learning by osmosis. Unless of course, something changes, in which case it may be time to discuss …
Your Done For You offer.
In other words, total financial management for clients with high levels of complexity or those seeking to outsource all aspects of wealth creation & protection. This is your degustation with matching wines premium offer, for which you charge premium fees too. It’s where all identified areas of strategic areas of advice are managed by you, without need for their involvement to the limits allowed. They receive full access to your advice team and to you, bi-annual strategy reviews & full reporting, plus all inclusive production of new advice and documentation. Add in tailored personal communications – the information they need to know as they need to know it – and the guiding hand of a business knowing that this isn’t only a package being delivered because someone is rich, but also because they need the support, guidance and accountability (at least for the next 12-24 months) to make sure things get done well now, to reap the benefits later.
There’s more that sits behind this in our program – the delivery model to monitor it, the Review experience to support it, the tech to enable it and the mindset of what advice actually is to excite clients to be part of it – but the basic crux is this…
Service models have been built on a flawed premise that service levels are defined by revenue received.
It’s no-ones fault, and certainly no reason to lock yourself in a cupboard awaiting the latest barrage of media onslaught.
It’s how it was done and what clients signed up for, but it’s a way of thinking that belongs to a different business model.
The new game is about need, aligned with that key question of the value generated compared to the fee paid (minimum 5x, target is 20x).
Frankly, it’s a damn sight easier to explain.
It’s passes the “that makes sense” test in a way the other model really doesn’t.
At the end of the day, if it engages more clients at various profitable price points, enables you to build a service model that isn’t dependent on you, and gives you the mechanism to explain advice more easily to more people, doesn’t that feel like we’re on the right track?
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