Good advice commands a premium

Too many of us thought we were experts until we were faced with the current marketplace and possibly the bankruptcy of modern economics, as we know it. It seems that many of us were “winging it” as experts because we’ve been in the right place for the last few years of tremendous asset growth, which had little to do with our asset allocation decisions or market timing.

What’s an expert?

An expert is simply someone (or a firm) that stands out.

The commercially oriented experts raise awareness of themselves proactively on purpose. The not-so-commercial experts let the marketplace do its work and eventually their expertise will be recognised. This is the strategy of “the quiet achiever” – so prized in our Australian culture.

Whilst not trying to be un-Australian, we believe that to be able to consistently charge a premium for your advice you do have to be perceived as an expert.

What are the types of experts?

The most common perception of an expert is the “product” expert.

This is the lawyer who has written the book about estate planning, for instance. Or the broker who buys/sells shares for all the high rollers. Or the accountant who is a renowned speaker at conferences on international taxation. These are all “product” experts, who are technical subject matter experts who literally have written a book or published white papers or written academic courses on their area of expertise.

Another type of advice expert is the market expert.

This is the adviser who understands all the many technical issues to solve the common financial complexities being faced by a specific market of clients. This could be the adviser that specialises in understanding the whole range of financial offerings (for example, lending, insurances, cashflow, taxation, structures, financing, negotiating) for, say, owners of motor vehicle dealerships. Another example is those advisers who understand the financial intergenerational issues being faced by families handing on “the family farm”.

The market expert’s depth of technical expertise may not rival the “product” expert in the many different financial disciplines that make up the whole services offering. Therefore, they often “head up” the relationship and bring the necessary expert technical skills to their client where necessary.

You don’t have to write a book or publish white papers to be an expert, but it certainly helps. Thanks to the Internet and ever-lowering production costs, books are now being ghost-written and produced for approximately $10,000. It’s certainly more expensive than the latest batch of your business cards, but it’s also more effective in positioning yourself as an expert in your selected niches.

Back to basics. Why do we want to be perceived as experts? So that it assists us in building very valuable advice firms. Therefore, what is the most effective expertise to build – “product” expertise or “market” expertise?

In the ideal world the answer is both. But the commercial world isn’t the ideal world.

In our “Cultivating Advice” workshops we insist firms build their “market expertise” muscles. Like all muscles, it takes time, practice and constant exercise to build strength in an adviser’s market expertise. But the benefits are worth it.

Our clients have built very specific expertise in a number of areas. These include: highly paid wage-earners of a major bank who also hold share options; divorced home-keepers (usually mothers) who reside in a specific location and have never looked after their own finances or even understood their financial options; sugar-cane growers from Far North Queensland with extensive family members employed throughout their enterprise; specialist doctors attached to a specific suburban Melbourne specialist hospital; owners of small retail enterprises in a specific industry located in a specific locality with more than 45 staff. The list of possibilities is endless.

Unfortunately most advisers believe that building market expertise is similar to building client trust – it takes a long time. I strongly challenge that thinking. Market expertise can be built quickly by deliberate, focussed and continual research with appropriate people (not necessarily clients). The objective of your deliberate research is to fully understand the financial complexities specific to a narrow and deep market of specific clients, not everybody.

Provided we have a genuine desire to assist a specific market, we have seen advisers “standing out” in their selected markets in as little as six months.

As the advice supply and demand curves take on new shapes in months ahead, owners of advice firms will need all the expertise they can muster to differentiate themselves and to enjoy a premium for their services. Have a go; raise more awareness of yourself. Not only will it help you with your pricing, you might just like it.