Applied Financial Planning

Pricing advice

BY   |  FRIDAY, 10 MAY 2024    8:00AM

Pricing has always been a complex area for advice firms. It requires getting the right balance between maximising profitability and having a competitive offering that enables you to win new clients.

Complicating things further is that a blanket approach is not feasible in an industry where client needs and service requirements are different depending on the individual.

As a start, price can be very misleading. It is easy to compare fees, yet difficult for clients to discern the value of one service in comparison to another.

There is a tendency for many people to associate price with process rather than outcomes.

Consider two mechanics - who charge the same amount - one highly experienced and capable with state-of-the-art tools, and the other an apprentice with older tools and limited experience.

The former may be able to assess and fix your mechanical problem within minutes whilst the latter may take hours to achieve the same outcome.

In this scenario you may feel aggrieved at paying the experienced mechanic the same amount as the apprentice-it does not feel quite right to pay the same amount for minutes of work versus hours of work. As an industry, we need to remind ourselves - and our clients - that it is years of experience that have allowed us to achieve the required result more quickly.

Why do we need a pricing strategy?

It is important for every business owner to regularly assess their pricing methodology to ensure that it is still the most appropriate.

The pricing decision for financial planners is particularly important given that financial planning services are a discretionary purchase. Moreover, many of the underlying activities involved in producing quality advice are hidden from a client's view.