Advice…a Commodity? Really?

In a recent article on Financial-planning.com, an advisor was quoted as saying, “Most people look at advice as a commodity, so the best way to differentiate yourself is through your communications and service.” The purpose of the article was to emphasize the importance of effective client communications, something I wholeheartedly agree with. But this quote jumped out at me for a couple reasons.

First and foremost, a commodity is generally defined as something widely available and consistent regardless of source.  I doubt that any advisor would consider his or her advice to be readily interchangeable with that of another advisor.  If the same advice were given by everyone, it really wouldn’t even be advice!

The more important question is whether or not clients recognize the value of your advice or do they view it as standard, off-the-shelf stuff – the equivalent of a commodity?

  • Consider the depth to which you explore your clients’ situation, their needs and concerns, their vision for their future? Do you spend considerable time in conversation with them? Or do you jot down a few things on your legal pad or ask them to fill out a questionnaire?
  • What about how well you assess your clients’ risk exposure? Risks you can help them plan for as well as preparing for the unexpected. Or do you ask them to check a few boxes on a standard risk questionnaire – or worse, guess what you think their answers would be.
  • And what about your investment recommendations? Are they backed by your investment philosophy, an investment policy statement and appropriate allocation strategy? Or do your clients’ investments look like a collection of “ideas” accumulated over time.

The other reason the quote jumped out at me is the concept (which is not unique to the advisor quoted in the article) that differentiation comes through good communications and service.

While I agree that good service is vital to a healthy practice, it never makes up for mediocre advice.  Your advice is your product; the service is the wrapper.  Your dry cleaner may have wonderful service (friendly staff, drive-thru, etc.) but does that matter if they don’t get the spots out?

Your advice and your advice process are the heart of what you do.  Don’t let anyone dismiss them as a commodity.

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