Clients aren’t paying for our time and we should not be selling time. The key to making money is to disconnect income from time, and connect it to value. The reason is that there are only so many hours in a day / month / year to sell, and that puts a limit on the amount of money we can make.
This is a good time to make the point that …
Many advisers freely admit that they are too soft on clients and undercharge their fees. It is common to charge for the big tasks but not for the little ones (e.g. the 20 minute phone call, researching a question, follow up questions).
It’s a fact that most advisers are attracted to our industry because they are empathetic, compassionate people. We do this work because we want to help people. We want to make a difference.
However, when a sole practitioner is facing fixed costs of $30,000 – $50,000 every 1st January to start the year, it is not possible to do that. In fact, it is critical that advisers stay in business and maintain good profitability in order to be able to continue helping clients. In other words, over generosity will kill your business.
Back to selling value instead of time …
Time is a resource used in the advice production line. We assign a cost to time spent because in a people-dominant business, we need to understand how much our services cost and we need to ensure we are recovering our costs and our salaries, even if it is our own salary.
However, we don’t need to sell time. The reason is that spending more time in producing financial advice doesn’t necessarily equate to increased value to the client. It could be an indication of being slow or inexperienced; or poor knowledge and skills.
Conversely, spending less time on a task, because you are now more knowledgeable and experienced, doesn’t diminish its value.
Excerpt from “THE ART OF ADVICE – creating a value-based financial advice practice” (CPD available soon)