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Before I give a talk to advisors, I ask the sponsor to send out a survey to participants asking a number of questions. The key one is: What’s the most difficult question you get asked by prospects?
The responses center on how to justify fees and value. The problem is that very few advisors know the right way to answer these most commonly asked questions.
What isn’t asked
After reviewing thousands of responses, what isn’t mentioned is as significant as what is.
No advisor has reported being challenged by technical questions about investing or relating to their expertise or experience.
As a group, you’re well trained and highly qualified. I’m not surprised you don’t have difficulty fielding questions in these areas.
Three categories
The questions you find challenging fall into three categories: Fees, explaining your value and differentiation.
The fees question is straightforward. It’s typically expressed as: How can you justify your fees? The subtext is that robo-advisors, Schwab, Vanguard and others charge lower fees. The prospect wants to know why he or she should pay you more (sometimes significantly more).
Explaining your value is really a variant of the fee issue. Presumably a prospect who was persuaded by your value proposition wouldn’t have concerns about your fees. This question is often asked like this: Can you explain how you add value?
The differentiation question is often an effort by the prospect to justify changing advisors. The question is posed as follows: How do you differentiate yourself from my present advisor or from another competitor the prospect is interviewing?
Those questions are a trap for the unwary.
Flawed assumptions
Many advisors blindly respond to these questions by justifying their fees, extolling the value they provide and blithely differentiating themselves.
This approach is premised on a flawed assumption that the same responses are applicable to all prospects.
Think about that. How can you justify charging the same fees to a widow who may be clueless about investing and financial planning as you charge to a do-it-yourself investor who only needs your investment advice and is comparing your fees to those charged by Vanguard for index funds?
The same logic applies to justifying your value. The value you add differs depending on the needs of the prospect.
Trying to differentiate yourself from a competitor you may know little about is an exercise in futility.
A better approach
There’s a better way to deal with these questions.
Instead of defending your fees or discussing the value you add, respond to these queries as follows:
I can tell you what we do for our clients and how much we charge. I can also answer any questions you have about our services, fees and what we do for our clients. With that information, you should be able to determine if we are the right fit.
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In a similar vein, when you are asked to differentiate yourself from the current advisor to the prospect or another competitor, respond as follows:
I can explain what we do and describe our investment philosophy. I can also answer any questions you have about these services. I don’t know enough about what other advisors do to differentiate ourselves, but you should be able to make a decision about the right advisor for you once you have this information.
These responses are effective because they don’t involve “selling” and they shift the burden of persuasion from you to the prospect. They also “talk up” to the prospect by making it clear that he or she is intelligent enough to make this decision, once the relevant facts are disclosed.
This approach is supported by studies (referenced here, at p. 179) indicating that the stress hormone, cortisol, increases in situations that “include perceived novelty, unpredictability, and lack of control over the situation.”
My proposed responses transfer control over the decision-making process from you to the prospect. By empowering the prospect, you reduce stress and foster a mind-set more conducive to a favorable outcome.
Dan Solin is a New York Times best-selling author of the Smartest series of books. His latest book is The Smartest Sales Book You'll Ever Read. His sales coaching practice includes helping advisors convert prospects into clients and generating leads through videos and other elements of marketing. Dan is not affiliated with any advisory firm.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives
