Combatting Low Fees
If you ever need to combat lower fees, begin by understanding what your competition is actually doing. Then form your strategy accordingly.
Listen to this audio episode or read the transcript below to learn how to de-commoditize yourself and why you need to win the value-argument instead of the fee-argument.
Anybody offering financial planning or money management at a reduced fee is saying there’s no difference among people offering financial planning or money management. ‘Money management is money management, so always opt for the lower price.’ They want your clients and your prospects to look at you as a commodity. Commoditization creep is inevitable in most industries. Water is water, right? Well, no, not if it’s Evian. If water can be de-commoditized, anything can be de-commoditized.
Fighting commoditization is not a one-time event.
You’ve got to continue to de-commoditize yourself. The fight never stops because the moment you are successful, your competition will copy you, and voila, we all look alike again.
Look at the whistles and bells game the variable annuity industry plays. There are a lot of great innovations in variable annuities, and they’re cloned in a heartbeat. If you become known as the epitome of great service in your hometown, you’ll be copied before you can blink. So you have to continually evolve. De-commoditizing yourself is a process, not an event.
You cannot win a fee argument if someone’s charging lower fees, especially if the perception is that the products and services offered are completely or nearly identical. You have to win the value argument.
You’ve got to get your clients and prospects to stop buying into group think. Explain to them that your role is to help them identify their needs and tailor specific solutions. And that specialized attention is well worth your fee. Don’t assume they’re going to figure that out on their own. Often times people think the value lies in the price. The lower the price, the greater the value. You need to open your clients’ eyes to all the added value you offer.
Your products cannot and will not make you different.
When a consumer watches an ad for a discount firm, he or she is led to believe that they know all they need to know about being a wise investor. They think they can pick among various investments without your help. Your job is to make them rely on you. You’re not going to do it by convincing them you’re better. You have to convince them that you’re different.
How are prospects and clients going to know you’re different?
I’ll give you two suggestions.
One way they’ll know you’re different is by getting to know you, the real you, not the financial advisor you. And here we go again. Who you are is far more important than what you know. Clients simply want to know they can trust you. They’re not pursuing an MBA.
Another way to be different is to make the client experience an awesome journey. A Hyatt hotel journey is good, a Four Seasons journey is awesome.
The moral of the story is simple. When someone tells you they can get it cheaper elsewhere, don’t ask how you can be better than the competition. Ask how you can be different.
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