I’ve worked on countless projects with my clients, and one topic that consistently comes up is how practices should go about pricing their advice.
I often call it a “gateway topic”, because so often it provides exactly the insight needed to identify what the practice needs to do to make rapid improvements. Be it process improvement, client engagement, technology integration, or any one of twenty other things, it finds the problem and shows it for all to see.
I’ve seen more practice owners have “ah-ha” moments when doing pricing than any other project, suddenly realising that their understanding of cost, value, and price was flawed or entirely incorrect.
However, one critical principle that I always emphasise is that pricing should never be an excuse to charge whatever you can get away with. I’ve seen instances where the most expensive advice has also been the worst, and it’s not always a coincidence.
The Double-edged Sword of Pricing
Weirdly, it’s often those most concerned about fair value who fail to recognise their own worth, while those who focus on extracting the highest price possible fail to provide enough value to justify anything, let alone advice.
But pricing isn’t about what you can get. It has a real fundamental purpose, that is as much about client interests as it does others.
The true purpose of getting pricing right is to give your practice the foundation it needs to provide excellent advice. Believe me, this isn’t just an attempt to connect profit with a noble cause – it’s an undeniable truth. I can trace most instances of where practices have been caught not serving clients as they should to one of two causes:
- Greed, arrogance, and thinking others will never spot when they’re being taken for a ride,
- Being under financial pressure, unable to invest in technology, people, or simply lacking the time and capacity to manage their workload.
Choosing the Right Clients and Maintaining Values
To ensure I work with clients who share my values, I made a rule not to engage with those who exhibit the negative qualities mentioned above.
This decision is one reason I work directly with practices, that I get to “choose” (rather than have to because I’m contracted to someone else to do so) based on who they are and their values.
Learning to say no is an essential skill in various aspects of business, from being a successful owner to working with clients who genuinely value your services and even in boosting your productivity.
The Myth of Price Sensitivity
The truth is, price sensitivity is often less of an issue than we think. If people were truly that sensitive to costs, many of the financial issues that clients bring to advisers wouldn’t even exist.
The real danger in pricing lies not in clients or prospects rejecting your fees, but rather if they’re willing to pay them without being absolutely certain that doing so won’t impact them achieving the very reasons they seek advice in the first place.
The goal is to be able to look your client in the eye and confidently say that you can deliver at least 10x the value of what they’re paying over the lifetime of your engagement.
If you can’t, then the right thing to do is help them find someone who can.
The interesting thing is how many of you reading this might think you can’t, yet you already have, are and will.
Delivering Value and Finding Balance
Finding the right balance in pricing is critical.
It’s not about charging as much as possible. It is about providing a solid foundation for your practice to offer exceptional advice to your clients.
Related: How We’re Using Typedesk To Create Communication Efficiency in Advisor Practices