Pricing to Capture a New Generation of Wealth: Transparency Is Key

Aug 21, 2019 / By Elaine Belsito
Horsesmouth Assistant Editor
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It’s not your father’s financial services industry anymore. With the era of the trusting, deferential client coming to a fast end, there are new guidelines for pricing and presenting your services. Number one on the list: transparency.

Strategy and marketing consulstants Simon-Kucher published research paper Nothing to Lose: Pricing for the Next Generation of Wealth Management Clients earlier this year. This guide on how to price for the new financial services client and environment says that to capture younger clients firms need to let them (1) See what they get; (2) Choose what they want; and (3) See what they will pay. Below is an example of an up-to-date service description that allows clients to see what they are getting, along with some thoughts about financial jargon.

From the report:

The financial advice profession is shrouded in a blizzard of impenetrable acronyms, densely-worded descriptions and lamentably uninspiring jargon such as ‘cash flow modeling.’ Even the beloved term ‘fiduciary’ is hardly likely to cause a spike in the adrenaline levels of the average sentient lifeform.

Advisors have—it is fair to say—traded for years on the obscurity of the field in which they operate. This worked best in the age of the trusting, deferential consumer. But that age is fading, and clients today are actively comparing advisors to the competition, starting with the fees they charge. Hence, being crystal clear on value is a must (unless price wars happen to be your thing). The other major problem faced by the financial advice profession, is that the language used to describe the value proposition of specific advisors is generally couched in terms identical to that of the next (and previous) advisor on the list, even though the actual services delivered may well be materially different.

The herding instinct leads us to imitate others and seek safety in conformity. It still works pretty well if you’re a zebra. But in today’s wealth management landscape, the way to avoid getting eaten is to go against thousands of years of evolution and break away from the pack.

A characteristic of [the advisor focused on the new generation], therefore, it is a tendency to describe in well-thought-out detail what a client who retains the firm’s services can expect to get for their fees. Here is an example, taken from the website of Townsend Financial.

Source: Nothing to Lose: Pricing for the Next Generation of Wealth Management Clients, Simon-Kucher & Partners

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