Financial Project Managers tend to price ‘the lot’

I ended my last post by asking you whether, if your role was not so much that of a ‘financial planner’ as a ‘financial project manager’ for your advice clients, you would still price just for your ‘bit’ of advice.

One thing is becoming clearer to me. There are an increasing number of advice firms adapting their approach to presenting a price model where they are increasingly pricing ‘the lot’.

These ‘financial project management’ firms resemble in some ways a building firm.

For instance, it was like the guy who last managed the building project at our place. He used to be a hands-on builder, but he was now heading up a building business employing other builders, whilst also providing an overall project management role.

He engaged my wife and I on what I originally thought was going to be a small project. However, after several meetings, our business estimated a (huge) bill for everything. My wife took over negotiations and we eventually accepted.  

We didn’t pay him direct for everything. We paid the plumber’s bill, the electrician’s bill, the roofing people. These were paid direct to the supplier of the service after they were all presented to and checked by the builder. He charged for his project management services as well as for the services of his own team of builders. We signed a contract for services which placed liability of work with the individual suppliers. When we had a huge issue with the flooring people, he project managed a solution for us (and them).

We didn’t have the time, ability, attention to detail, knowledge, or experience to project manage our building project. We’d tried in the past, only to be left with an unfinished addition, because we couldn’t agree on variations. We ended up just paying someone else to finish it.

My doctor doesn’t just price her work either. She bundled an estimate for her surgery, plus what the anaesthetist would separately charge, what the hospital would charge, and also included her probable post-operative consultations.

Even the guy I bought my latest car from priced the whole lot. He took a look at the car I was trading in, noticed the racks on top, the tow ball, and the heavy duty carpets inside (lots of muddy football boots at our place) and priced them all into the new car, even though the racks and tow ball were from another company down the road.

What’s driving this bundling?

I reckon two things. First, the obvious one – the Internet.

Thanks to the Internet financial services are fast becoming another commodity.

If you don’t believe it’s going to get tougher to be able to charge a premium or specialise at ‘establishing a standard self-managed superannuation fund’ (even the taxi driver that dropped me at the airport the other day was talking about how I should get into a self-managed super fund), you haven’t being paying attention to what the internet has done to travel agents, the media, the universities and much of retail. All their offerings are being commoditised.

The second driver of bundling?

A fundamental belief among an emerging breed of financial advice business owners who want to best control and oversee the achievement of the aspirations of and outcomes for their advice clients. In order to do this, they understand they have to manage all the relevant in-house and external subject matter experts, whilst managing the legal boundaries of associated professional liability, to best lead the solution for their clients.

Is there higher risk for these bundlers compared to those sticking to their own knitting, to their own expertise? Sure.

But I believe there is, long term, a potentially higher risk for the ‘non-bundlers’, unless they are extremely specialised.

The non-bundlers will find themselves fighting in an increasingly crowded market of technical specialists for the attention and referral of those advisers who focused on becoming ‘principal advisers’.

These future firms of ‘principal advisers’ will provide their clients with more confidence and value in their financial aspirations compared to the specialist who continued to focus just on their advice ‘bit’. The principal advisers will therefore control the adviser-client relationship.

By the way, most accountants have not stepped into the role of ‘principal adviser’. They, like most financial planners have been too singularly focused, to build the culture, skills and ability to perform the ‘principal adviser’ role.

This is the opportunity – a new space for ‘Principal Advisory’ firms.

These are great times to be building great advice firms.

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About Jim Stackpool

For nearly 30 years Jim has influenced, coached, and consulted to advisory firms across Australia. As founder of Certainty Advice Group, he leads a like-minded team of professional advisory firms seeking to create greater certainty for their clients. As an author, blogger, columnist, and keynote speaker, Jim is regularly called upon for his professional insights into the advice industry. His latest book Seeking Certainty is available now.

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