Over the last couple of years, in the absence of stellar financial product performance, price has become the product differentiator of first choice for consumers seeking wealth management services.
This has not served consumers or financial planners well. (Mind you, I don’t believe the years of stellar product returns prior to 2008 served consumers well either!)
Too many people seeking wealth management services think they are actually buying greater certainty in their financial lives, when in fact they are only buying today’s best performing product or today’s cheapest product.
Advertisers promoting the large industry superannuation funds, for example, exhort Australians to ‘compare the differences’ in service pricing between ‘retail’ and ‘non-retail’ superannuation offerings. These adverts hold the promise of better financial returns resulting from buying the cheapest offering. Consumers are influenced to believe that price is the most important consideration when assessing where their superannuation funds should be best placed.
Evidence abounds – in the cars people drive, the houses people purchase, the clothes people wear, the holidays people take and the groceries people buy – that consumers don’t just buy on price. These same consumers wouldn’t think of comparing the cheap and quick offerings from their local fast-food restaurant to the more expensive and special offerings from the favourite restaurant they only visit on important family occasions.
Price is important, but it isn’t the most important aspect to consider when assessing which wealth management service is right for each consumer. Delivering financial returns is also important, but again, it isn’t the most important aspect of purchasing wealth management services.
Other instalments in this series: