Ok, so I am going to take what may be a controversial stance here. You see, I believe that most professional services firms are undercharging their clients in a systematic way.
Or more precisely, they are confused about the real value they bring to clients and are consequently over delivering on service while undercharging on value.
It’s not just the professionals that I perceive are confused, it is also the institutions – the educational institutions and the politicians.
Let’s take Financial Advice in Australia as a proxy for my point. Right now we have ASIC and the Royal Commission in Australia focused on issues like ‘fee for no service’.
Now I’m not going to comment on the systemic issues the Royal Commission has raised with the Financial Advice ecosystem, and nor am I going to comment on the small minority of individuals who have clearly done the wrong thing by their clients.
My message instead is for the vast majority of Advice Professionals who are legitimately drawn to the idea of Advice and being of service to their clients.
Every year I meet with hundreds of Business Owners and Practicing Professionals in the Advice and Service fields. I also get to speak at events and have thousands of conversations on social media. Here is what I am observing whether it’s in the Financial Advice, Accounting, Consulting or Legal space.
Believing that service is an output rather than an input
Think about the fact that our businesses are labeled as ‘Professional Services’. As humans, we are prone to creating and abiding by such labels which indoctrinate our thinking and affect our behaviour. We have come to believe that service is the end result that we deliver to our clients instead of it being just an input to the value that our actions create.
Our educational institutions reinforce concepts of process-driven actions to justify fees charged to clients and our regulators are following suit by focusing on even more linear ways to force more actions as a way to create better outcomes for clients.
This misunderstanding is that actions under the guise of service are the output for the client, when in fact they are just another input and only relevant in how they contribute to the output (if they, in fact, do at all).
Which directly leads me to my next observation.
Believing that value comes from how much you do rather than the impact you have
A good Adviser can change the course of someone’s life for the better in a few words. On the other hand, a technically proficient, compliant, and process driven filler of time sheets can deliver a whole lot of actions for a fee that creates very little impact for the client.
The reality is that there is no inherent value in the things we do in the guise of service – value only comes from the benefit we create and has no correlation to how much we do in order to create that impact.
Now I’m not saying that we don’t need compliance, best practice or process, because we do. I’m saying that all of those things should only ever be a means to deliver the real part of Advice, the part that helps clients make realisations, change behaviour, and make smarter decisions to get more of the life they really want.
Most Advisers do not understand their own value
The cold truth is that most Advisers do not understand their own value, they articulate it poorly to clients and they focus on the justification of their fees based on the amount of work delivered, the tasks undertaken or the linear benefits produced, i.e. investment return, tax saved etc.
Getting a job done, creating a tax saving or generating an investment return, are also only inputs to the value a client perceives, they are not the output itself.
As technicians we are taught that our value is in our knowledge and in our time. The truth is that our value only comes from how we bring those things to bear in order to impact the lives of our clients.
Put simply, most firms I have researched are, in my opinion, undercharging a significant portion of their client bases. This means they are unable to reach critical mass, are unable to ‘process drive’ sufficiently the compliance aspects of their business, and do not have enough head-space, time, or resources, to focus on the most impactful ways to bring the greatest value to their clients.
Most are also over delivering on things that look good as a fee justification but do not actually bring value to clients.
It’s easy for firm owners to justify this situation as a means to protect clients. The truth is that sheltering your clients from an honest conversation about value and fees is the opposite of acting in their best interest.
There is no point using technology to leverage efficiency or social media to multiply your new business growth if you are not first and foremost clear on what your value is, who you deliver it to and that you charge all of your clients appropriately for the value you bring.
P.S. If you would like me to expand on the theory and action you can take to better engage your clients and set your fees, drop me a line or let me know in the comments…