Back in the day, there was a significant movement in the accounting profession which was commonly referred to as “value-based pricing”
Some in that profession took this to mean that they no longer needed to worry about how much they could charge a client, it was all going to be taken care of by convincing the client of the immense value the accountant provided to the client, and they would be begging to pay for it. It is true some (few in my experience) accounting practitioners DID begin to add more value to their clients, other than the compliance stuff like financial statements and tax returns that they had been doing, and started to make real contributions to the business clients for whom they worked.
The problem was and is, that the vast majority of the clients of accounting practices are not really looking for this kind of service. A sole proprietor plumber is not really a likely candidate for business development work, nor is an employed steelworker going to avail himself of detailed end of year tax planning strategies. In my mind, these clients value the compliance, though not particularly highly, and if they can obtain a level of comfort that their compliance has been dealt with, so they don’t get into trouble, that is more than sufficient.
The legal fraternity have also faced this kind of challenge. The cost of a simple will is WAY less now in real terms than it was when I first had one prepared, this despite attempts on the part of some to introduce a level of complexity to the process which simply doesn’t often exist. Conveyancing costs are about a third of what I paid for my first home, the routine and mundane has become much less profitable than it once was. There is an emergence of lower cost online providers prepared to do simple tasks for around one-third of the cost of the traditional legal firm.
In the financial advice profession, we are seeing something similar. Advisers historically would charge a fee based on a percentage of “Funds Under Management”, and attempt to justify this fee by citing “improved performance”, or “access to better investments”. Or “wholesale investment costs”, or “making it simple for you”. The problem is that in the age of the Robo-Adviser, none of these is true anymore – if it ever was. A client can have access to an Exchange Traded Fund (ETF) which mirrors the local stock market at a cost of 0.14%, and can execute the transaction online in minutes, or get their children to do it for them. For many “simple” cases this might be a viable option (Let’s leave the Active v. Passive management debate for another day). What SOME clients value goes way beyond investments, and it is this need that the financial advice profession needs to meet, because like tax returns and financial statements, wills and probate applications, there will inevitably be a race to the lowest cost, the cash cow has been killed and fed to the circling wolves. Cash flow management, risk mitigation, behaviour management, debt reduction, goal-setting are all deliverables which more clients will value, but so few in our profession are delivering.
All three professions (and likely others) are faced with the challenge of identifying what it is that their clients (or their potential clients) value, and then making a judgement as to whether they can deliver it, either on a skill-set basis, or an economic one. The “value” we are seeking here must be in the eyes of those we choose to serve, rather than an invention of ours.
As professionals, we have a great deal of expertise, knowledge and experience which we can bring to bear, but to a large extent, our professions have taken the simpler road of doing mundane work for people who don’t really value it, and for a long while we have been able to charge a great deal for it. This is now coming to an end. In future, the highly skilled will be doing work for their clients as befits their talents, and will be able to charge a premium price for it. Those who choose to try to stick with the status quo will disappear as their business models become unviable, or their clients are taken from them by robots.
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