In all of the economics, business and marketing training I’ve been exposed to over the last twenty-five or so years, there is alarmingly little emphasis placed on the importance of a strong Unique Value Proposition (“UVP”), and even less available to help you really understand what a Unique Value Proposition is and how you can develop your own UVP for your business.
I went to the experts at Advocis for their advice. This Blog is adapted from questions posed to Barbara Riddell, Vice-President of Education and Membership at Advocis, Canada’s largest voluntary professional membership association of Financial Advisors, representing more than 13,000 members.
Barbara is primarily responsible for education leadership, corporate business development, and strategic direction. She also oversees chapter relations, member services, and student services. More than 25 years’ effective leadership experience in financial services in product development, communications, training, and coaching have given Barbara the skills, knowledge, and perceptiveness to position Advocis as the industry standard in Advisor education.
Question 1: What do you mean by the value of advice?
That is a great question, and one that we examine closely in our Professional Financial Advisor Designation Program. A Financial Advisor’s value can be quantitatively defined by competence, proficiency and performance measures (such as portfolio value) but it can also be differentiated through significant qualifiers stemming from a unique combination of their skills, attitudes, experience, and education. These differentiators are what can set the value of an Advisor apart from the crowd, but they can be challenging to articulate as a value proposition. Layered into this – and perhaps more importantly – is how clients perceive the ‘value of advice’.
Question 2: Can you tell me more about client perceptions of value?
Just as value is unique to each Advisor, the value of financial advice can also mean something different to each client.
For many clients, the growth of their portfolio assets might be the most critical piece of the value they assign to their Financial Advisor. Thus, an Advisor’s value is likely to be determined by wealth accumulation through superior portfolio performance.
However, it is also true that what many clients value at one point in their lives may not be what they value in the future. The precipitating factor in this value shift is often a life-altering event, such as divorce, birth of a child, job loss, starting a business, death of a family member, inheritance, retirement, or even a pandemic! These events change relationships, alter client’s needs, and can impact their perception of value. The Advisor skill set valued in these situations is to have “under the table” discussions with clients to probe and understand their goals, help them maintain a long-term perspective, and taking a disciplined approach in adhering to their financial plan.
In the 2021 article “Value of an Advisor Study – A sharper focus on the value of your advice” by Russell Investments, the value of an Advisor was quantified as a measure of the technical and emotional guidance a trusted human Advisor can offer. Having concluded that the overall value added by an Advisor in 2021 was 3.95%, the contribution of behavioural coaching to that value was a dominating 2.0%. This also reflects an addition to Advisor value of more than 1% over the previous year. This is not surprising given the challenging times of 2020 and it highlights the evolving Advisor role and the value they bring to clients.
Question 3: How important is it to articulate an Advisor’s value to clients?
Client retention is higher for Advisors who effectively communicate their value to clients. According to a 2019 survey by EY Global Wealth Management, “one-third of clients switched providers or moved assets in the past three years and another third plan to do so in the next three years.” Of the 2,000 individuals surveyed, the highest overall value for financial advice was during major life events and as wealth and investment knowledge increased.
The global pandemic has been a hugely significant and life altering event, affecting Advisors and clients alike. As we begin to envision a post-pandemic world, there is the potential for Advisors to revisit their value proposition in this light – to consider the value brought to clients, to contemplate their behavioural coaching role and determine how to effectively communicate this to clients.
Question 4: What tips would you have for Advisors on creating effective Advisor value?
Some of the steps to bring value to clients or prospective clients:
- Know what clients want and when. Keep in mind the highest overall value to clients is during major life events and as their wealth and investment knowledge increases.
- Solutions to achieve financial goals are more important than products and services. Clients want more personalized advice and planning.
- Contemplate the value of financial literacy. Educating your clients translates into greater client retention. Consider the following from the aforementioned 2019 survey by EY Global Wealth Management: “Just 20% of clients with ’in-depth knowledge” would consider moving their assets elsewhere in the next three years, compared with 40% of clients with low levels of investment knowledge.
- Showcase your value beyond investment performance with discovery sessions and by utilizing a financial planning approach, including behavioural coaching.
Question 5: Given the challenge of writing an effective value proposition, what advice would you give?
As part of the Professional Financial Advisor Designation program, we looked at what experts say about best practices for crafting a value proposition that resonates with clients. Included below are best practices based on research conducted by Pershing (BNY Mellon).
Creating a Value Proposition – Best Practices
- Your value proposition should include the following three basic promises as they have proven to resonate with investors:
- Tailored solutions to meet the needs of clients
- Work that will be in the best interests of the client
- Access to experienced investment managers
- A message containing promises to simplify your client’s life appeals to a limited market: specifically, young and very high-net-worth clients. If one of these demographics is your target market, language describing simplicity may resonate – if not, however, your message may be lost or ineffective.
- If your investment philosophy is conservative and focuses on preservation of capital, then you should include this in your value proposition. Pershing and BNY Mellon research revealed that very few value propositions contained statements suggesting caution and prudence, such as:
- We focus on income and capital preservation
- We take a conservative approach to help you live comfortably today and protect your legacy for the future
- Investors place a very high importance on the values of trust, integrity, and accountability. However, this is not as simple as telling clients that they can trust you to handle all their financial needs. Trust, integrity, and accountability are demonstrated in your everyday dealings with clients and prospective clients and are not recommended for use in your value proposition. You may, however, be able to include this messaging on your website through testimonials from satisfied clients. Always make sure to get the testimonials approved by your compliance department.*
- Consider using the following recipe when formulating your value proposition, as all the value propositions that ranked highest in the Pershing BNY Mellon study contained each of the following ingredients:
- Attributes: Characteristics of the Advisor, such as a firm’s size or years of experience
- Benefits: What the investor gains because of working with the Advisor
- Reason: A rational explanation of how the firm’s (or Financial Advisor’s) attributes produce benefits for the client
- Emotion: Language that evokes feelings
- Review your target client market. Does your value proposition appeal to what you know are the needs and concerns of your target client market?
- Watch your language. Avoid the use of industry jargon and use plain language and an emotional appeal to craft your message. Where possible, link emotional and rational appeals together. Pershing and BNY Mellon found that some words resonate better than others. Here are some of the client preferences revealed in their findings:
- Comprehensive over holistic (88% to 12%)
- Comprehensive over expansive (85% to 15%)
- Unwavering over committed (84% to 16%)
- Passionate over dedicated (81% to 19%)
- Comprehensive approach over 360-degree view (80% to 20%)
Although these promises are common amongst Advisor value propositions, you still need to consider adding them to ensure your value proposition will resonate.
Remember, that it is always a best practice, and in your best interests, to go over any client-facing materials you create with your compliance team.
Whether you are a new Advisor looking to create a UVP from scratch, or a seasoned advisor who wants a UVP refresher, your prospects and clients will be convinced “You’re the Top”.
As usual, there is a song title hidden in this blog post. What is the song and who is singing it?
About Jennifer Kuta
For more than 25 years, I have worked with Advisors helping them build their businesses. My commitment to you is to partner with you in your practice and offer solutions to help build your business.
*Refer to OSC staff notice 33-747 www.osc.gov.on.ca page 34-35 for guidance.
Investment involves risk, uncertainty and assumptions. The value of investments rise and fall and there is a risk you may not recoup the amount originally invested. Past performance is not a reliable indicator of future performance.
The contents of this blog are the personal views of the author and individuals referenced in the post, and not necessarily the views of Caldwell Investment Management Ltd. The contents are provided as general in nature and should not be relied upon nor construed to be the rendering of advice. Readers should consult with their own compliance/legal advisors for advice on their specific circumstances before taking any action as sales and prospecting activities are subject to regulatory oversight.
The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed. No representations or warranty, expressed or implied is made by Caldwell Investment Management Ltd. or its affiliates.