How to Grow Profits

I can still see the surprised looks on their faces.

It was November 1989, during a three-day “Agent As A BusinessPerson” workshop MLC asked me to design and facilitate.

One of the last sessions for the twenty-five accountants and financial planners had each attending firm calculate their cost-to-serve.

This was back in superannuation’s early boom days when the first $3,000 contribution to super was an automatic tax deduction. MLC ran these workshops around the country, hoping to help their aligned firms grow profits, not just revenues.

The initial cost-to-serve findings during the session weren’t great, with many participants surprised by how little superprofit they were creating after allowing for their expenses and notional drawings.

Most committed to further post-workshop analysis and necessary corrective actions.

In retrospect, I could have done a much better job.

Cost to serve is not a great model for enduring profitability, even in 1989.


The promise of cost-to-serve models is simple.

The modelling promises owners a basis for future profitability and pricing.

Cost-to-serve models pricing and profitability in legal, accounting, engineering, valuation, architectural, surveying and similar professional services firms.

Cost-to-serve modelling tends to create cost-driven rather than value-driven decision-making.

Cost-driven decision-making separates the objectives of advisory teams from their clients. Advisers seek to manage costs, while clients seek to increase value. Advisers and their clients must be aligned for enduring and equally rewarding relationships.

While short-term profits tend to trace short-term cost control, long-term value creation for professional services firms has less to do with costs and more about returns on valuable investment decisions, particularly in team members.

Cost-to-serve modelling can, however, work for start-ups. For the wrong reasons, start-ups often use cost-to-serve models as a drunk uses a lamp-post – more for support than illumination.

When revenues are tiny, and baby firms can’t afford to pay their founders what they could earn elsewhere, cost-to-serve models are a common starting point to identify short, simple paths to quick surpluses.

Modelling can justify a cost to serve (i.e. make advice cheap) to leverage an attractive low price to undercut ‘bigger’ competitors and secure needed new clients and cashflows. This dangerously positions start-ups atop a slippery slope, measuring their success by bank balances, only to eventually realise cashflows don’t fund growth – profits do.

Cost-to-serve comparisons often highlight the benefits of an M&A in due diligence papers. Identifying the projected benefits of acquisitions during due diligence is far simpler than managing the day-to-day reality of merging clients, teams, systems and experiences with varying value and capacity.


Clients of advice firms are not buying costs.

They are buying value.

The fundamental problem with cost-to-serve models is the assumption of what value clients buy.

Monetary value or psychological value?

Monetary value is the comparative value created when a seller can beat another seller’s price or one seller’s products outperform the competitive products.

For instance, Australia’s industry superannuation giants used a monetary value proposition in their successful ‘compare the pair’ advertising campaigns. Their market share and momentum will continue to grow until they fall victim to their marketing, gobble up each other and somehow prepare for the inevitable monetary value battles with the emerging fintech advice giants who will ‘Spotify’ the automated advice market providing Michelle Levy’s ‘good’ advice.

Financial advice firms lack the scale of the giants.

Once through their start-up phase, it is hard for firms to generate enduring profits to fund their growth relying upon a monetary value proposition. Some may excel as a brief ‘best performer’ provider for a while, but it isn’t a sustainable profit generator for the majority.

Financial advisory firms need to position themselves using a different type of value – the psychological or intangible value.

Psychological value drives people to buy Rolex watches, pay premiums for purchases vital to them, go into significant debt for lifestyles they can’t afford, and compromise short-term gain for longer-term impact.

While access to solid-performing products is essential for every advisory team, an advisory team skilled in delivering profitable psychological value is a better success differentiator than access to the best or cheapest products in the market.

The greatest challenge in managing successful advisory teams delivering psychological advice is less about their cost management and more about their capacity management.


Capacity-to-serve models broaden an advisory team’s capacity to increase client loyalty, reduce key person dependency and increase profitability.

Unlike cost-to-serve, capacity-to-serve modelling provides the steps to reduce key-person dependency by modelling value delivery via a skilled and collaborative team.

Using pricing models built upon a firm’s value rather than a firm’s costs, capacity-to-serve modelling better aligns advice fees to real value delivered rather than advisory effort or monetary value provided.

Capacity-to-serve models align business plans and team career plans by focusing on each team member’s increasing capacity to collaborate on delivering client value while growing client satisfaction.

Fundamentally, capacity-to-serve models are capacity-to-care models.

The future of comprehensive financial advice depends on increasing an advisory team’s ability to deliver impactful and valuable care without the historically high dependency demands upon crucial roles.


I could have done better back in my 1989 workshops in two ways.

Firstly, by not focusing as much on the costs as a basis for pricing, but by helping the advisers better understand and grow their confidence linking their pricing and the value experienced by their clients.

Secondly, back in 1989, like today, advisers enjoyed more demand than they could supply. In these marketplaces, while cost control is important, it is not as important as capacity control.

Capacity-to-serve models provide the tools to link team careers and overall business plans, to reduce dependencies while building client loyalty, and cultivate cross-functional teamwork rather than build competing silos of talent.

Cost-to-serve models have a small part to play in ad hoc reviews of specific teams or clients when price committees need a deeper dive into non-performing teams or client pricing precedents need updating.

As a strategic planning tool, however, cost-to-serve models offer a thin defence against advisory teams’ growth challenges.

The battle ahead for an advisory team isn’t growth.

It is profitability.

As the fintech giants strip today’s product margins in their quest to dominate the monetary value marketplace, financial advisory teams need the right tools to profitably serve clients seeking valuable financial care for the consequences that matter to them.

What do you reckon?





Photo credit: shutterstock_2175393405



For over 30 years, Jim has influenced, coached, and consulted financial advisory firms across Australia. He founded a training firm, Certainty Advice Group, to coach, skill and build advisory firms delivering comprehensive, unconflicted advice with fees priced purely on client value. He has grown a solid and collaborative community of advisory firms aligned to his firm’s comprehensive advice model – Certainty Advice – Australia’s only Certification Mark accredited by ACCC and IP Australia for impartial financial advice. He presents at conferences, has judged professional advice awards, written industry white papers, chaired practice management curriculums for tertiary institutions, and authored four books on financial advice – his latest – What Price Value – was released in March 2022.




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