Outcomes Determine Advisor Value

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As a teen, I spent three hard hours shoveling 12 inches of snow from Mrs. Townsend’s lengthy driveway. Finally finished, I requested $15 for the work. She gave me $10, explaining that’s what someone with a plow offered to charge.

I learned a painful economic lesson about the value of labor. That lesson is still important today.

One challenge for advisors is communicating the value of our labors. Much discussion on this subject focuses on the time involved, or number of visits with the client, or the cost of technology to analyze or recommend.

In fact, the old sales commission model worked in earlier eras mainly because each transaction was large enough to offset the costs for both successful and unsuccessful efforts. The representative was responsible for prospecting, scheduling, qualifying, presenting, and closing each sale. That is a lot of speculative effort, and likely deserved the compensation.

That old pay system valued inputs.

Some of those inputs are still important factors today, but not necessarily to the client. Instead, those are key factors that determine profitability to the advisor. In a real sense, they are part of the manufacturing process, not the final product.