The Value of Financial Advice – An Inside Story.

I had a prospective client ask me when she would see a return from the cost of my financial advice. It was a brilliant question, and it caused me to think deeply about not only the value I offer, but the relationship between price and value.

Sometimes value can’t be measured within a specific timeframe, and often you can’t even quantify it in dollars.

How valuable is peace of mind knowing you can retire as a couple, or even on your own?

How valuable is ‘knowing’ that you’re going to make it into the nicer home after all?

Returns on financial advice can be instant when it produces peace of mind, but other times, it’s harder to see until you get there.

Price is known now, unknown later, and often value’s unclear now, but clear later.

You wouldn’t make the lowest price the only goal. Focussing too much on price can cause value-blindness. You still want a low price to value ratio, but sometimes seeing the future requires faith. And sometimes it’s hard to get faith around future value outside of human input.

Financial advice, or knowledge applied to your situation, can offer intangible and unquantifiable future returns. I know I’m not selling it, but that’s the point – motivation isn’t the value, the advice is, and it only works when you’re ready for it. Good financial advisers convert strategies born out of one person’s challenge into solutions for other people. They’re able to convert weaknesses into strengths and predicaments into possibilities simply because ‘they’ve seen this before’ and often know what comes next.

A cynical take on the financial services industry is understandable. There’s nothing like an obvious financial benefit in the form of a commission or fee based on volume to put into question their motivation.

The logical conclusion is to avoid the whole topic of commissions and fees for advice and go somehow more direct, using anonymous call centers and platforms. ‘It’s okay you think, because they’re a ‘low-cost’ provider, I’m still winning’. On the price side yes, but what about value? Is it better to have access to low cost ‘products’, or advice around how to build something amazing?

Even with better accessibility and ‘finfluencer’-based educators showing the way, it’s just as confusing as it was before for the everyday investor. Regulators and product providers aren’t helping much either. Too many choices, and even consumer protection often doesn’t help people get what they really want – answers to their questions.

I believe the piece of mind comes from an impartation of faith in a future value that people need today. This is the return from getting good advice.

Advice is information that should move the needle, because it should move you.

For the last 12 years, I’ve been developing a fee-only model of financial advice, that’s separate from any sales activity.

I’m not the first to charge fees for delivering financial advice, and thankfully, I won’t be the last. I believe this is the future though, and I’m excited to share another discussion with someone who blazed the trail ahead of me here.

Check out this discussion with former financial adviser Tony Walker.