When’s the last time you paid a fair & reasonable price for something?
This morning’s coffee?
When you last filled your car?
Your last holiday?
Your special person’s Christmas present?
Your donation to a bushfire cause?
We make fair & reasonable decisions all the time – often automatically. Mostly instinctive and usually very biased.
We’re more likely to consider something to be fair & reasonable after a referral from a trusted source. We’re also more likely to donate a different fair & reasonable amount after the frightening images and headlines rather than prior.
Fair & reasonable means different things to different people, at different times.
I wonder what ‘fair & reasonable’ advisory fees will be under the new FASEA Code of Ethics?
This was the question I was asking nearly thirty years ago while running a pricing workshop.
There were about twenty-five principals of financial planning and accounting firms sitting in a U-Shape in one of Melbourne’s CBD hotels.
At the time, many were nearly twice my age, many were from outside town, many had large multi-disciplinary offerings and many did not pay a cent to be attending my ‘gabfest’ as it was ‘supported’ by the product provider paying my fees, their lodgings and fancy night out after.
I was facilitating the group to understand their beliefs and practices about amounts they charged, and how they determine the value of their services. Discussions focussed on examples of charges for an on-going existing client receiving a range of services.
What’s a fair and reasonable fee?
Most responses just followed the last bloke (I can only remember one female being present), saying we charge about the same as them.
Then one young bloke said, “I charge about twice as much as you all”.
He was asked to bring in more detail for the next session to help everyone understand what extra he does and how he gets his clients to pay twice the rest of them.
Next session, the young bloke gets up and freely shares the outline of their plans and engagement documents and fees on very nicely prepared transparencies (remember early 90’s).
One of the most ‘successful’ experienced advisers broke the silence.
“I congratulate you. You’re getting away with a fee that’s twice what most other people in this room are charging for similar services. But I couldn’t do that to my clients”
The young bloke smiled.
As an aside. It is moments like these that facilitators like me realise we have the best jobs in the world. We get to facilitate clashes of business paradigms between strong personalities keen to substantiate the beliefs that have not only supported their success, but often underpinned egos.
Back to the young bloke.
“Thanks. I’m possibly a bit different to most here. So far, we’ve nearly doubled revenues year on year, we’ve a waiting list of new potential clients, we all take over four weeks off every year, we only charge advice clients via retainers and we believe if we can maintain our focus on what our clients value, rather than what we value, we hope to continue as planned.”
The shortest and best presentation I’d seen at the time on value pricing.
What’s fair and reasonable?
Unlike that young bloke, we’ve had a generation or two of financial planners, lawyers, accountants, mortgage brokers, insurance agents, investment advisers, as well as legislators, enquiry chairs, association heads, and advisory dealer groups whose paradigm for value has been entrenched in the efforts or products of advisers rather than in what each unique advice client considers valuable.
Positioning advisory value on efforts or products doesn’t work anymore.
We’ve moved on from VideoEzy and Blockbuster to Netflix, Disney and Stan.
The old infrastructures and paradigms can rarely keep up with the pace of change.
As of 1st January 2020, the game that young bloke was playing thirty years ago is finally arriving for the majority of advisory firms.
We now have to engage advice clients annually on fees expressed in amounts they understand (i.e. dollars) without any other incentive or fee that a ‘disinterested person, in possession of all the facts’, might reasonably conclude not to be in the best interests of the client.
Value is aligned to the client.
Clients confirm prices and fees as fair and reasonable.
Great times to be building great advisory brands.
What do you reckon?
Photo Credit: istock
ABOUT JIM STACKPOOL
For over 30 years Jim has influenced, coached, and consulted to accounting & financial advisory firms across Australia. His firm, Certainty Advice Group specialises in the growth, client engagement and pricing of financial advice. He has created Australia’s highest and only ACCC/IP Australia Certification Mark standard of comprehensive advice – Certainty Advice. He is also an author, blogger, and keynote speaker covering topics on his firm’s expertise.