If Pricing is Your Differentiator, Your Wealth Management Firm is in Trouble


Last Updated on May 7, 2021 by Carlo Navarro

Competition in the wealth management space is heating up. More accurately speaking, it’s been piping hot for awhile. Traditional advisors are grappling with how to attract the next generation as a crowded marketplace and digital platforms (“robo advisors”) worsen downward pressure on fees. Creating and maintaining a strong pipeline of clients is essential, especially amid a rapidly evolving competitive landscape — and it is incumbent on advisors’ to differentiate to held their ground against competitors.

Differentiating requires meeting another challenge: communicating value. Advisors have long been hard-pressed to confidently, eloquently, and effectively communicate value and differentiate with clarity. Automated platforms have a leg up here: they provide frequent, automated demonstrations of value to their clients via teams of marketers that are constantly illustrating how fantastic their customer experience is. Advisors must take a page from this book, especially as clients are often unclear on what they are getting unless they are shown, repeatedly.

Price is Moot, Differentiation is Key, Advisors Struggle with Both

Competing on price is ineffective. Automated solutions will always have a price advantage; but more importantly, under 100 bps, clients become much less sensitive to price differences. Traditional firms and advisors must be in the ballpark when it comes to pricing. This is a fundamental expectation clients have, and advisors who come in at a reasonable fee will not experience significant pricing pressure. Those who aren’t in the ballpark have to address the pricing issue before even considering more unique ways to differentiate. In reality, differentiation is the only viable path to effectively compete.

But differentiation in wealth management is difficult.

What advisors must realize is that clients seek out a demonstration of points of value, even if they aren’t asking for it per se. Advisors must also come to terms with the fact that demonstrating value is far more involved than distributing performance reports or sending a birthday card. Advisors demonstrate anytime they make visible and highlight what they are doing for their clients to help them meet their objectives. Given that what advisors do is an abstract service, making it visible and communicating its value requires extra work.

Differentiation is difficult when it comes to something as abstract as wealth management, and it requires creativity and a much broader approach to thinking about what constitutes value for the client. Advisors tend to go the extra mile for their clients. Many offer a nuanced approach to investing (e.g. combining behavioral finance with real-time risk analytics) and augment services with access to adjacent products (investment funds, insurance products, financial planning calculators, or tax planning services offered through your firm). Consolidating assets and information, providing education on investing, risk mitigation, and estate planning are all ways that advisors may add value for their clients. The kicker is that most clients are not aware of this value, or how these services make their advisor different.

If Advisors Provide Value and No One Hears It, Is It Value?

Differentiation also requires effective, frequent communication of value — another sore spot for advisors. As illustrated above, there are many different possible points of value and ways to demonstrate this value, and there are various ways to communicate this value to clients. Unfortunately, most advisors miss the boat on effective communication and (let’s call it what it is) marketing. Here is a sampling of common mistakes advisors are making:

Bland/generic value proposition — An InvestmentNews poll revealed that more than three- quarters of financial advisors communicate their main value proposition as “their ability to understand client needs and objectives.” This is the opposite of differentiation and leaves clients wondering what’s so great about their particular advisor.

Not staying in touch — Regular, frequent communication with clients about their money can actually help them feel calmer and more in control. Yet, many advisors believe the opposite to be true and (tragically) hand the reigns of communication over to CNBC and other blood-pressure-spiking media.

Not demonstrating subject matter expertise — Clients want to know that their advisor has a  finger on the pulse of the market and the industry, but many advisors think that’s a given. It’s not.

Avoiding digital channels — In the same vein as keeping a finger on the pulse of the industry, advisors must also demonstrate that they’re “with it” when it comes to digital. Advisors must ditch the notion that their clients aren’t tech savvy and ensure that they have a presence on channels where their clients spend time, including email, blogs, podcasts, and social media.

Poor marketing materials/messaging — Including descriptions of products and services on the website is the bare minimum. Brochures, flyers, emails, branded client portals, and other well-designed marketing materials should communicate the advisor’s unique value proposition and reinforce the value that clients receive.

Not automating — Automation has become paramount for advisors in 2021. Not only does it cut down on time-draining administrative tasks, but it frees up time for advisors to spend working one-on-one with clients. Finding simple ways to streamline operations can put advisors on par with some of their more digitally-forward counterparts and allow them to scale more easily

Advisors often feel a nagging discomfort because they fear they are not getting the credit they deserve for all the work they do for clients. We don’t blame them….unless they are not doing everything in their power to clearly demonstrate and communicate value to their clients.

In an environment where external pressure and competition continue to mount, financial advisors must be able to explain the value they bring to client relationships and communicate this value effectively. Thankfully, there are ways to improve and shine the spotlight on the various ways advisors help clients meet their goals. Stay tuned in the coming days as we map out the most effective ways you can demonstrate these value points to clients — and communicate how you’re doing so early and often.

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  • Ashley Poynter

    Ashley specializes in content marketing for complex industries. She is passionate about helping fintechs tell their best stories.

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Ashley specializes in content marketing for complex industries. She is passionate about helping fintechs tell their best stories.
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