I was walking across Westminster Bridge the other day, admiring, as I always do, Charles Barry’s fabulous 1840s Palace of Westminster, when I was struck by a flash of insight.
It happened as I passed by the Big Bus company rep who was selling sightseeing rides to a couple of tourists from Taiwan. He listed the places they would see, including Tower Bridge, St Paul’s and Buckingham Palace. There was a skilled guide to inform them about all the London highlights they passed, the open top deck would let them take advantage of the spring sunshine and there was even an option for discounted visits to some of the places on the route.
But best of all was the flexibility: it was hop on, hop off, so they could take their own time, re-boarding any Big Bus as often as they wanted all day, leaving time for lunch or even revisiting a favourite spot later.
An excellent pitch. And when the rep told the couple the price – £31.50 for a day, and yes that was each – they paid up.
He was explaining the value of his tour, and clearly separated that value from the price. Quite rightly, because they are two different things. And that flash of insight crystallised in my mind the difference between the two.
He was explaining the value of his tour, and clearly separated that value from the price. Quite rightly, because they are two different things.
The charges conundrum
I had been struggling with it for the previous two hours. I was at the Money Marketing Interactive event at the old County Hall talking about the value of advice to a room packed full of financial advisers. On the panel were two excellent IFAs, Informed Choice’s Nick Bamford and Yellowtail’s Dennis Hall. Both stressed the value a good IFA added for their clients.
On displaying charges on their websites, Nick said he did, while Dennis did not. He had tried it but then received far fewer contacts from would-be clients so had taken them down.
I, of course, thought every adviser should display their charges. It is only shops in Bond Street in the category “if you have to ask the price you cannot afford it” that do not. I do not believe that is true of advisers. After all, even they do not put diamond coronets as a potential investment return.
At the conference I was accosted (in a largely friendly way) from the audience and over coffee and biscuits later by those agreeing with Nick and Dennis. The real measure of an adviser’s worth was the value they added, not the price they charged. Some even said that mentioning anything so grubby as price might lead to clients choosing an adviser on the basis of price alone. That, I was told, would be a disaster. Presumably on the principle of you get what you pay for.
Others said you could not put a price on value. And because the two words are easy to confuse in English (for example, we talk about a valuable painting when we mean one which has a high price tag) the sense was that value and price were two sides of the same coin. If you talked about value and how much you added there was no need to talk about price.
The real measure of an adviser’s worth was the value they added, not the price they charged.
The value sales pitch
This muddled me. But Big Bus man made me realise it entirely misses the point. Value and price are completely different. There is nothing stopping advisers selling on both. “Here is the value I add and, by the way, I will charge you this.”
I know that advisers give clients an indication of what the cost will be at some stage. Not least, of course, because they have to. But when I say that advisers should disclose their prices clearly and upfront, as some do, I am not suggesting they should not add value. Or indeed sell their service on the basis of price.
Nowadays, thanks to the RDR, advisers do not earn commission from sales. That has liberated them from any suggestion that they are just there to sell a product. In fact, many at the conference – and on Twitter recently – have said firmly to me that they are not there to sell products at all.
They are there to take you where you want to go in life. Minimise risks and maximise potential. Help you understand the way money works. Of course, at some point, a product will probably be needed but only to achieve those life goals.
Adding value to lives is, at least in part, what financial advice is about. One adviser gave an example of a couple who were travelling round Europe in an RV. They only realised they could afford to do that after a discussion with the adviser. Or what about the client who realised he could afford to retire earlier than he thought? Who told his boss to stick his job and left with a smile? Value added. Or handholding, as one called it.
Of course, explaining to people about money, helping plan their objectives and working towards meeting them is all fine stuff. And one reason why, since they were invented in 1988, I have been recommending that anyone who wanted to invest or had complex financial affairs should find a good independent financial adviser.
Good IFAs can add value. But to say you cannot put a price on value is simply nonsense. Your charges are the price of that value. On price alone, the Taiwanese couple would have paid £4.50 each with their contactless cards for a daily capped fare on a passing Transport for London bus, with (unadvertised) hop on, hop off. Cheaper.
But they happily paid seven times as much for the tourist value they wanted. So sell the value, and tell the price.
Paul Lewis is a freelance journalist and presenter of BBC Radio 4’s ‘Money Box’ programme. You can follow him on Twitter @paullewismoney