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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?
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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.
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.
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.