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Dennis Hall: The value of outcomes over the cost of advice


I was recently involved in a Money Marketing Wired panel discussion about the cost of advice. Yet I cannot help thinking there is a wider discussion to be had.

It is bit like a dog chasing its own tail – going round and round for hours in ever decreasing circles, only to ultimately be left breathless and frustrated at the end of it all.

A couple of viewers challenged the panel by suggesting the focus should not be on cost, but instead should consider value. Actually I don’t believe value is the correct focus, but it’s better than concentrating on cost.

From a consumer’s perspective there are many variables that determine the service they ultimately pay for and price is just one. As for value, only they are in a position to judge what value is to them, though that doesn’t stop us from pronouncing our ‘values-based’ propositions.

As if we have a clue?

In my opinion people are more concerned about successful outcomes and a high degree of certainty of achieving them. Focusing on cost, and to some extent on values too, detracts from the outcomes.

In other areas of my life I am the consumer, and it is worth considering what we look for when we’re on the buying side. Price rarely has a dominant role in my buying decision; it’s mostly a desired outcome and the experience along the way.

Any value I derive is based on the things I measure, and not necessarily what others consider to be value.

Keeping the proposition simple also scores well with me. Using a budget airline with low starting price is anathema to me, as I know I will have to navigate several other cost points.

I would rather use an airline with a single ticket price because while it may cost more, my blood pressure will remain stable.

Consumers face a bewildering amount of choice and decisions to make. We would serve them better by giving less choice and making it easier for them to buy our services. I do not believe we achieve that by having long menu options and opaque charging structures.

Recently six of us went for dinner at Fera, the new restaurant in Claridges.

The menu was simple. The a la carte section had (I think) four starters, six mains and four deserts. It cost £85 for three courses regardless of what was selected. Alternatively for £120, the tasting menu included everything on the a la carte menu.

We chose the latter for simplicity.

For the wine we asked the sommelier to spend a similar amount to complement the courses. It wasn’t cheap, but it was a great experience. The outcome was better than expected and I’ve now been twice in as many weeks! It had nothing to do with cost.

Dennis Hall is managing director of Yellowtail Financial Planning



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Dennis

    The “clue” is to ask clients what they value and that should give you a steer in the right direction.

    I accept different people value different things and that “price” is just one factor in determining value, what they experience is another.

    Odds on you could have got an equal experience at a cheaper restaurant but perhaps your story highlights that “brand” is another factor that consumers deem important in determining value.

    Simple and transparent propositions and pricing won’t get an argument from me though.

  2. Advertising men will be among the first to tell us that customers decisions are more driven by emotion and brand associations than rationalising product and pricing messages. The latter is generally used after the fact to justify a decision – “yes darling, I know choosing a Porsche as a family car seems ostentatious, but the 200mph will come in handy when I have to rush you to maternity”.

    However, unlike tangible products, financial services tend to be about optimising return on investment, ie via portfolio management and tax-planning. Since returns are limited (by the long-run risk premium), the cost of delivery becomes hugely important (versus the cost of doing nothing) – the higher the cost, the lower the return. Customers may not recognise that issue, but the FCA does and is focussing heavily on COBS 6.1A.16G – “…whether the personal recommendation…is likely to be of value to the retail client when the total charges the retail client is likely to be required to pay are taken into account”.

    Unlike the restaurant analogy, the quality of the advice experience and the simplicity of the offering may have a price, but the test in financial services is whether an alternative and cheaper experience would have delivered a better return on that investment.

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