From national research conducted among 180 boutique financial planning practices, we know that seven out of 10 advisers believe that a well-articulated value proposition is the most critical aspect of running a good business. This is an interesting finding, especially as I would predict that around the same number of practices do not currently have a good idea of what their value proposition actually is.
When we ask financial advisers within boutique financial planning practices to sum up what they can offer to their clients in 30 seconds, a look of panic often crosses their face. For those that give it a go, the answer is pretty good, but it often fails to adequately capture what they do, nor does it differentiate them from the adviser down the road. This does not do advisers or practices the justice they deserve.
I should point out that the boutique financial planning industry really is no different to any other industry that is similar in scale when it comes to articulating their value. However, not every industry has just faced the past 18 months the financial services sector has.
It is the common view that we are emerging from what has been one of the worst financial periods to date. At this time more than ever, a strong value proposition can make or break a financial planning practice. In this challenging climate such as this, a firm is unable to simply hang its hat on strong returns to help retain and attract clients, it needs another hat stand. This is potentially your value proposition.
Summing up in a concise way what you provide to your clients and, importantly, what sets you apart from the crowd, does not have to come across as a sales pitch. Rather it should be a statement of fact about what you do coupled with the ability to back up these claims with evidence, particularly around the way you and your support staff service clients. All the intangible aspects of providing financial advice need explanation.
While it is true to say that developing your value proposition is likely to be the hardest marketing task you will ever have to do, it is the most critical to your business and the most rewarding to complete. This is because it validates the strategy you are following for your business, explaining why you choose to run things the way you do, why you work with your clients the way you do and what outcomes you will deliver.
Let’s talk about differentiation. Differentiating your business is a key component in building and maintaining a strong practice. This can come from not only what you offer, but also the type of clients you are targeting. For example, one firm might take the approach of servicing a large number of clients, aiming for lower individual portfolio values that do not require too much individual attention.
Other firms pride themselves on low client numbers with higher value portfolios, providing a more personalised service. Others might be linked to an accounting firm, so they can provide an integrated solution for a broader range of financial needs.
When it comes to fees, returns and revenue, this is an important area for any small business to get right. Our benchmarking studies, conducted across a two-year period, highlighted a number of key challenges boutique firms are facing during the current time. One of the most significant is that average revenue has dropped by 20 per cent and average profit has fallen even further.
Crucially, a concise value proposition allows you to price your services appropriately, to reflect the hours, effort and expertise that goes into the tasks you carry out on your clients’ behalf. This can translate directly into more revenue for your business, as what you are being paid for is a true reflection of the work you are doing.
When creating a value proposition, there are a number of pitfalls to watch out for. One is providing product explanations and using these to explain what you do. This is not a description of what the client is taking away from your business. Anyone can offer a product.
Value propositions should be more than this, they need to tell the client how partnering with you will bring them real benefits. Do you save them time by taking away administration heavy and complicated tasks like superannuation and estate planning for example?
Another common mistake is using language that is more vague than it is concise. Your value proposition should be quantifiable and specific. Further to this, the statements you make should be backed by proof to give credibility. If you have won an award for service, say that to support any statements you make around how your service sets you apart from the crowd. If you saved your clients money last year, through integrating planning and accounting functions for example, develop some percentage points to show how.
I have talked a lot about clients here, but a good value proposition can actually help you reach out to more audiences than a single group. Attracting and retaining quality staff is crucial for boutique firms, as staff create the foundation upon which the practice stands.
In a similar way to how clearly articulating the type of practice you are and what you provide can attract clients, it can attract staff too. It can create an image of a forward thinking, client-centric business, which any adviser or paraplanner would be proud to work for.
If you do not feel you could confidently tell the person sitting next to you right now what your practice does in a way that is clear, concise and does it justice, you may like to consider getting your value proposition in order. It will take time and effort, it will take brainstorming, it will take careful wording and probably a lot of rewording too, but the journey is definitely worth it.
Liz McCarthy is head of Macquarie Practice Consulting.
