Do You Need to Focus on Differentiation?
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I spend a lot of time studying about how financial advisors should differentiate themselves. But perhaps this is a waste of time for several reasons:
- Saying you are different is not meaningful. It proves nothing. The only thing that can differentiate one FA from another is what they deliver that the client values. Michael Kitces says, “differentiating on service is difficult because there’s no clear and consistent definition of what ‘great service’ even is. Especially since what is great service to one client may not be to another. What constitutes ‘great’ is truly in the eye of the beholder.”
- Does it matter if another firm or advisor does exactly what you do if what you do is delivered with excellence?
- Michael Kitces reports, “It’s incredibly difficult to use ‘great service’ as a differentiator. In fact, according to one recent study, 72% of all advisors differentiate on client service. By definition, when the majority of advisors differentiate on the same point, it’s not differentiating anymore!” It’s common for people to think what they do is above average. It’s called “illusory superiority,” a cognitive bias where a person overestimates their own qualities and abilities, in relation to the same qualities and abilities of other people. For example, AAA reported, “Despite the fact that more than 90% of crashes involve human error, three-quarters (73 percent) of US drivers consider themselves better-than-average drivers.”
Most important, as Blair Enns stated, “The challenge in determining the value of our service is that the quality of an idea not yet delivered (and implemented) is difficult to measure.”
Instead of thinking about and talking about differentiation, focus on delivering value, as defined by each client, and have the client decide whether your value is enough to choose you as her or his advisor.
As Kenichi Ohmae of McKinsey & Co. stated, “If you are fighting with a competitor who has equal qualifications, effective and persistent execution in critical functional areas may be the only differentiating factor.” I once heard a talk by Bill Gove who said, “When all else is equal, I make the difference.” Essentially, differentiation is a function of:
- Delivering what the client finds of value; and
- Having great relationships.
I have addressed what are high-value deliverables and outlined them in the document “What We Deliver.” This piece has several key points that should drive your practice. You:
- Provide comprehensive financial planning and wealth management.
- Focus on six core client-facing processes to ensure nothing is missed in securing your clients financial well-being.
- Provide a written client service model that provides a proactive and regularly scheduled contact plan with 24/7/365 availability to your team.