From CompliNEWS | Financial Service Intelligence Watch
Financial advice as an intangible service
By Lee Rossini
Giving financial advice is an intangible service – it doesn’t involve a physical product that clients can see, touch or easily quantify. Instead, it consists of expertise, trust, planning and strategic insights tailored to meet clients’ financial goals. This makes financial advice complex to package, market and sell, yet with the right approach, financial advisors can demonstrate its value to clients.
Financial advice has characteristics that distinguish it from tangible products. First, it is inseparable from the person delivering it – the advisor. Financial advice is personalised and requires the ongoing involvement of a trusted expert. Another characteristic is variability. Financial advice isn’t one-size-fits-all; each client receives a unique set of recommendations based on their financial situation, goals, risk tolerance, and future aspirations. This variability means that the advice itself can change based on who is delivering it and who is receiving it. Finally, financial advice is perishable. Although the value of advice compounds over time, the advice itself is subject to change due to shifting economic conditions, regulatory adjustments, and clients’ evolving needs. Therefore, staying updated and relevant is crucial for financial advisors to provide continued value.
Given its intangible nature, marketing financial advice presents unique challenges. Unlike tangible goods, where clients can see or feel the product, financial advice doesn’t provide instant gratification. The benefits of good advice take time to materialise – be it achieving a long-term investment goal, building a retirement fund, or creating a robust estate plan. This delayed impact can make it challenging for clients to appreciate the full value of the service upfront. Furthermore, clients may find it hard to distinguish between different levels of expertise among advisors. Since financial advice is built on knowledge and experience rather than physical qualities, potential clients may struggle to evaluate the true quality of advice. This can lead to price sensitivity, where clients focus on the cost of services rather than the value they provide. Trust also plays a huge role in financial advising, and trust takes time to build. For a small advice business, establishing credibility and competing with larger, well-known firms can be particularly difficult.
Showing Clients Value
To overcome these challenges, an advisor should focus on building trust, demonstrating expertise, and effectively communicating the long-term value of their advice. Here are some strategies that can help:
- Focus on Relationship Building – Take the time to understand each client’s unique needs, communicate regularly, and show a genuine interest in their financial well-being. This personalised attention not only strengthens trust but also differentiates small firms from larger ones.
- Educate Clients on Financial Planning Benefits – Helping clients understand the tangible outcomes of financial advice can be an effective way to showcase its value. This involves providing clients with case studies, explaining potential savings from tax planning, or detailing the benefits of having a structured retirement plan. By educating clients on how financial advice directly impacts their life goals, advisors can help clients see the benefits more clearly.
- Showcase Real Results with Data and Milestones – Although achieving financial goals take time, progress reviews reinforce value. Advisors can use data and reports to show clients what they have achieved. Whether it’s increasing savings or hitting a major financial target, these updates demonstrate the incremental value of ongoing financial guidance.
- Offer Transparent Pricing and Set Clear Expectations – Clients are more likely to invest in financial advice if they understand the specific services they are paying for and how those services contribute to achieving their goals. Offering tiered pricing based on services provided, being upfront about costs, and setting clear deliverables can help alleviate price sensitivity and ensure clients feel they are getting fair value.
- Testimonials and Referrals – Positive client experiences are invaluable. Actively seek testimonials from satisfied clients and encourage referrals. Word-of-mouth from trusted sources can help prospective clients feel more comfortable, addressing concerns they may have about credibility and value.
By focusing on building trust, transparency, and personalised value, a financial advice business can overcome the challenges of selling an intangible service. When clients clearly see the role of financial advice in achieving their life goals, they are more likely to appreciate, trust, and invest in this invaluable service.