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Why make a fuss over your Value Proposition?

Published: May 16, 2017 by Rob Macdonald, Fundhouse

Why worry about working on your value proposition? Surely being a financial planner is just about doing your work as well as possible and giving great service? The rest surely will follow. Well yes. And no.

Yes, because there are many very successful financial planning businesses with long track records who have done what they’ve done without giving a thought to a carefully articulated value proposition. And no, because many of these businesses now struggle with maintaining their service at the same levels they started when they were lean and hungry.

A bit like the frog in a pot of water that gently heats up to boiling point, seemingly out of nowhere, “suddenly” the 80:20 rule applies to your business – 80% of your revenue is coming from only 20% of your clients. On our Practice Development programmes, we’ve worked with over 300 financial planning businesses and one exercise we encourage participants to do is a client value analysis. Inevitably they discover that the 80:20 rule applies, and in some cases it is a 90:10 rule!

Advisers in this position now face the problem of what to do about this very long tail of unprofitable clients? It is a problem borne of an approach of tending to be “all things to all people”. When building a business, the conversation invariably boils down to: “You need financial planning advice? Sure I can help you.”

To compound this problem, a shift in how advisers are remunerated has begun, and ultimately most advisers will need to shift their remuneration model from commission to fees. In the past most financial advice fees came from the commission on products that advisers either “sold” or, to put a more positive spin on, “advised on”. This meant that there was no need to convince clients of the value you as a financial planner added.

After all the real value was in the product that you expertly introduced the client to, and advised on. So it was a great deal, my advice is free, but obviously you must pay for this product, which was built with very clever and expensive intellectual property.

As a result, advisers have severely underrated and underestimated their own intellectual property and value add. The result. The arrival of RDR means that the client must pay you for your expertise. But how do you suddenly convince them of that expertise when previously the perception has been that this belonged to the product providers, who produced these often complex and sophisticated products?

This is not a problem unique to South African advisers. In the UK there was an en mass exodus of independent financial advisers from the industry as they were suddenly put on the spot to justify their place in the sun, and more importantly, their fees. It is no surprise that in the US, even without an equivalent of RDR, the biggest challenge facing advisers is to articulate the value that they add to clients and justify the fee that they charge. In a 2016 FPA Study into Trends in Practice Management, US financial planners were asked what they consider the most important trends in practice management. The top three were: first, Being able to effectively communicate my/our value to prospects; second, Being clear on the value I/we provide clients; and third, Ensuring clients perceive high value relative to the fees they pay.

In a world of selling products, an ability to sell and have great products is the key to business success. In a world of professional advice, this changes. The need to be clear on the value you add, and communicating this to clients becomes critical. This is why we make a fuss about your value proposition.

The benefits of having a clearly articulated value proposition are many. Clients and potential clients will understand what you stand for, what you offer and how they will benefit from dealing with you. They will understand why they need to pay you a fee. As highly successful Australian financial adviser, David Haintz says, “Price is only an issue in the absence of value”.

Having a clearly articulated value proposition will also help you define the type of client you want to deal with. Having an ideal client profile does make it easier to say no to clients. To no longer be all things to all people. Because of the value you add, and the fee you charge, you don’t want to have an 80:20 client base. Adding a huge amount of value to 80% of your clients for no economic benefit doesn’t make sense, unless you have set yourself up as a non-profit entity.

A clear value proposition will also ensure that you are able to attract the right employees, particularly if you have an inspiring purpose that underpins your value proposition. It will also ensure that the services you offer and how you communicate with your clients are aligned around your value proposition, ensuring focus and consistency.

Bill Gates and Warren Buffett, when asked to consider independently of each other what the key has been to their business success, they both came up with the same answer, focus. And if trust is the currency of financial planning, then consistency is undoubtedly a critical pillar in building that trust. Consistency in your value proposition will ensure that clients know what you will or won’t do for them, and why they should deal with you rather than someone else. And most importantly, why they should pay your for your advice.

Defining and articulating your value proposition is not necessarily a simple process. It requires time, focus, perseverance and commitment. All the qualities you have already demonstrated in building your business. Make a fuss about your value proposition. At worst it will be hard work. At best, it will bring you closer to making a 100% of your clients economically beneficial to you and your business.



Financial Planning Association (FPA), Research and Practice Institute, 2016 Trends in Practice Management: Understanding and Driving Client Value.

Alice Schroeder, The Snowball – Warren Buffett and the Business of Life, Bloomsbury, 2009