How to Tell If You're Not Charging Enough
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A recent article by Bob Veres discussed the wide variation in pricing among financial planners and suggested that many aren’t charging enough.
I’ve written in the past about the fact that for many advisors, their number one priority today is demonstrating their value to clients. As a result, many advisors are putting a huge amount of time and energy into exploring ways to heighten the value they provide.
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That focus and priority is good thing – for good or for ill, we live today in a value-driven world, where increasingly clients make up their minds based not on yesterday’s relationships but on today’s value. That’s true in every industry – look no further than the success of Walmart, Costco and Amazon based on delivering more for less.
But delivering strong value is only half the equation when it comes to optimizing the profitability in the business you run – the other half relates to charging a fair price for that value. Here’s a simple test to determine if you’re not charging enough.
Operating in a price-driven world
First, let’s understand why this is such an important issue today.
Of all the changes in behavior arising from the spread of the Internet, the fixation on price is at the top of the list. Examples include consumers who go to Best Buy or Walmart to browse and then once they’ve made a decision use their smartphone to take a picture of the UPC code and search the net for lower prices.
Price sensitivity is not new to the investment industry – for stockbrokers, discount brokers changed the landscape in the US in the mid-1970s (led by Charles Schwab). And many advisors who have moved to fee-based accounts have seen a growing number of prospective clients (and in some cases existing clients) questioning fees.