Disrupt your own practice
Baz Gardner’s advice in Growing your practice: How to set yourself up for success, the second session of Morningstar’s 2020 Practice Optimisation Forum, struck a chord with time-pressed advisers. The three key strategies: value proposition, aligning value to fees charged, and building a steady pipeline of high-quality referrals delivered some immediately implementable opportunities for advisers to question and build on their day-to-day practises.
In a poll run at the beginning of the session – What is the biggest internal hurdle you face in growing your business? – advisers were evenly split across three answers:
- Spending time with the right clients
- Our revenue/ fee structures
- Consistently demonstrating value to our clients
Whilst not surprising answers to Gardner, he was keen to explain how interconnected these issues are. Working through these issues are fundamental building blocks to driving growth in any advice practice.
Value proposition: never done and continuously improving
A value proposition doesn’t stand alone and Gardner suggests it’s the most important thing to get right.
“Your value proposition is never done. It should continue to get better. Once a firm thinks they’ve got it right, is when we see stagnation set it.” It’s an opportunity to keep improving and perfecting how you articulate the value you add to your clients.
Some of the simplest changes can drastically alter the profitability of a business; for example bringing to the forefront the ‘implied value’ of what you provide clients. As advisers, it’s crucial to have a general value proposition when you begin your engagement, becoming an increasingly more specific value proposition as a prospect becomes a client. Key to this is exploring their objectives, needs and wants, to really get to know what they hope to achieve. Gardner noted that this element of relationship-building hinges on specific, emotionally resonant language, and appeals to the truly human needs of a client beyond returns.
Part of developing these targeted value propositions is accountability, and the partnership nature of the advice relationship. Being not just a sounding board but a source of objectivity is foundational to the success of an adviser-client relationship – which includes setting and managing transparent expectations from the start. “We’re professional nags and we’re going to protect you from bad decisions – we expect you to take it seriously,” Gardner said. As a result, he emphasises the importance of establishing what kind of partnership style your prospective clients expect from their adviser – a key step in engagement sequencing that sets the tone for the rest of the relationship.
Pricing models: every adviser I’ve met underestimates the value they provide, it’s just a case of by how much
What’s a good pricing model? Gardner suggests “one that charges enough, with the right people.” And one that allows for the charging of additional value with additional commercial exchange. This means a profitable, sustainable practice with sufficient price tension, therefore allowing adding value where possible. What a sustainable pricing model shouldn’t do is surprise a client.
If you were having a pool built in your garden and the contractors hit bedrock, they wouldn’t carry on regardless. There would be a consultation, an option to continue or not and a clear disclosure of the additional cost. Complexities and additional work as part of the advice process is no different. That’s why having a clear pricing structure and fully briefing clients before they agree to a service not only allows for a clear articulation of value and services, but establishes and maintains trust as well – leading to longer, richer client relationships.
Gardner suggested a base retainer fee to be set and charged annually, particularly in light of the Hayne Royal Commission. Importantly, he also noted that advisers should at charging additional fees where they deliver additional value: ensuring clear benefits for both parties. Again, he noted that explicit clarification of what fees are charged for is integral to ensuring happy clients.
Referral pipeline: your business – an expression of you
Finally, Gardner spoke about how to grow a client base and finding the right clients. Rather than simply looking for potential paying clients, he looks at potential clients whose goals and values are aligned to how he delivers advice – therefore enabling you to serve more clients, better. “Meaning is one of the five things I value most in my life,” he said, “so my relationships need to have meaning.” In creating these deep relationships, word-of-mouth referrals from highly engaged clients can become a key source of organic growth – in Gardner’s estimation, 2-3%.
Baz suggested adopting a ‘go-maybe-no’ traffic lights system to consistently ensure you’re focusing on clients most likely to result in successful, fulfilling, long-term relationships.
And if you’re getting all these moving parts right, here are some final words from Gardner: “the money that they pay you will never come anywhere near close to the value you’re creating, and the impact on their lives.”
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