What Price Advice?

My family is full of creative types.

All the kids and wife are active artists, except me. Actresses, writers, drawers, and designers. All super talented – of course.

But I was a tad surprised when some of their drawings and works were recently bought for use on a social media site. Really, they paid what?

Value is in the eye of the beholder. Similar to our notions of quality, value means different things to different people.

When it comes to the value of financial advice, what is the price for value?


Compared to What?

Consciously or unconsciously, we usually approach price decisions using “compared-to-what?” questions.

Does this serve us when purchasing and valuing advice?

Daniel Kahneman (refer Judgement Under Uncertainty) might suggest this “compared-to-what” approach is allowing the hypnotic tricks of “price anchoring” to potentially fool us into less than ideal conclusions.

For instance, if you’re told that everyone usually is charged about one percent of the amount in their superannuation fund for advice just as you are being offered a “deal” offering less than one percent, logic might suggest that’s good value?


While cheaper, is the advice more valuable?

In similar thinking, cheaper haircuts don’t often mean more valuable haircuts.

Since Kahneman and co-author Amos Tversky pioneered the work on price anchoring, their work has become mandatory texts for social economists, institutional marketing and pricing departments. The profound invisible influence of anchoring acts like the red cordial at our kid’s birthday parties as it grabs control of the mental wiring we instinctively rely upon when decision making.

The potential danger is when we don’t or can’t acknowledge which anchors are influencing us: those being presented, or our own authentic anchors of experience.

The fact that our advice fees might be less than everyone else’s, or our loan has been awarded as one of the best in last year’s market, or the new credit card has the most extended interest-free period, are all examples of presented anchors which may or may not serve our authentic best interests.

To manoeuvre the illusionary tricks of price anchoring, particularly those reinforced to us during a purchase process, mental shortcuts are needed to navigate the well-worn paths anchors instinctively lead us down.


When is a product not a product?

With apologies to the marketing experts, for the remainder of this piece, I’d like to differentiate between a product and advice.

That is, I’d like to suggest that a product isn’t a product, when it’s advice.

For instance, at nearly 60 years old, I don’t believe I need any advice regarding my haircuts.

A haircut for me is a product. When it comes to haircuts, I know what I want despite the consistent advice from three eager daughters.

My point is that presented pricing anchors are potentially less invasive when we are entirely clear on what we want.

It is when we are not clear on what we want or need when we are seeking advice, that extra caution is prudent as we are in the territory where mental shortcuts may help offset the red cordial effect of presented price anchors.

Financial products and advice are a tad more complex than my haircuts.

When determining the price and value of financial services, the “compared to what” techniques of price anchoring can quickly take us down rabbit holes of thought comparing a value that has been ‘anchored’ to something presented, even before determining our real needs.

If during a purchase decision of a financial product or advice you find yourself justifying the purchase because “it’s what everyone else has”, or “because it was rated the best by an expert panel”, or “it was last year’s best returns”, or “it’s the cheapest”, chances are you’ve fallen victim to the presented anchoring.

An indication of how endemic this practice is the justification of a decision being in someone’s best interests, primarily because the purchase was based upon a presented anchor such as ‘lowest fee fund’.

That may not be a bad thing, but the fundamental question remains – was the purchase valuable?

Specifically, was the purchase valuable without any influence of the presented anchoring?

The financial services industry has been providing the anchoring for our purchasing decisions for years.

The industry is littered with anchoring techniques such as award ceremonies, ratings agencies, product performance tables, and successful advertising campaigns such as “Compare the Pair”, as they all promote the awarded performers, bestowing recognition on specific financial products, or advisory firms and product providers, which then appear adorning the winner’s websites, email signatures and main road billboards.

All presented signs to anchor our value decisions.

So how do we determine the price and value of advice in a world full of presented anchors?


Identifying value

Firstly, presented anchoring is everywhere (even this piece) and always will be. It’s the recognition of these presented anchors as the first step to understanding value and price of advice.

Secondly, without presented anchoring, value becomes more intangible and more reliant upon our authentic value anchors.

We all have authentic value anchors.

This is the value we feel and experience in life’s special moments. This is the value we feel when surrounded by relationships important to us. This is the value we experience at the moment of profound realisations. This is the value we felt when we witnessed or participated in a significant event in our lives. This is the value we have felt when someone or something in our lives gave us that insightful perspective that instantly provided the clarity where prior there was uncertainty.

We all have these moments of value which not only affected us or touched us but sometimes provided the needed leverage to help us move on from enduring habits or paradigms that were not serving us.

Our authentic value anchors are often more heartfelt and gut feeling than just of logic alone. But this does not make it any less genuine when felt.  The strength and significance of these feelings fundamentally shift us in ways we may not have expected.

The bottom line?

When we are not clear on what we need or want – that is, when advice is needed – and we don’t feel a sense of value anchored against our own authentic, valuable experiences – a gut feeling so to speak – then just consider that before concluding on the value of the advice for you.

The purchase may still make sense, but understand the decision is being built upon the presented anchors, rather than intrinsic, authentic value.

Finally, be aware that as value becomes more intangible it’s measure and pricing must become more tangible.

Otherwise, we may fall prey to being ‘sold’ by those whose objective was really just a ‘sale’ based upon their presented anchors rather than any intent to ensure value of advice is actually delivered.

Value must be priced like everything else in our lives – easily understood dollar amounts.

Despite a world full of anchors tugging our decision making, most of us have successfully found authentic value when buying our homes, our cars, our holidays, the artwork for our websites, and even our haircuts.

Trusting our guts and hearts might sound old-fashioned when accessing the value of financial advice. But provided we are aware of the anchors being presented, provided we trust the valuable anchors of our own experience, provided the advice is priced in definite amounts, provided we can back out without undue penalty, provided we can feel or sense the significance of this advice for the here and now without being forced to make a long term decision just on today’s value, then it’s a good chance the advice be considered valuable.

Alternatively, the value of your financial advice may be just comparatively well priced to whatever anchors were presented to you, and that might be all you are looking for.

What do you reckon?



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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