If you are a financial professional, you are selling a service costing more than a person would pay if they chose the Do It Yourself (DIY) route. Before you start selling your service, it makes sense to understand why someone would pay for another to do that task.
1. Specific knowledge. Corporate executives often bring in consultants. A major reason is they realize they are facing an issue or a task where they do not have the specialized knowledge required to find the right solution. They are paying for skill. This is often the case when someone works with a CPA instead of filing their own taxes.
2. Time has a value. Doing housework is not complicated. You dust, sweep and vacuum. Many people choose to hire a housekeep to do those chores. It is not because they are incapable, but they have a full time job, are raising children or have a skill that pays a high hourly rate. A smart person might understand how the stock market works, but they do not want to be watching world markets 24/7 and taking action accordingly. They will hire professional money managers because it takes this task “off their plate.”
3. Trust. People are attached to their money. We know psychological studies have shown the loss of a certain amount creates for grief than the joy of gaining the same amount delivers. They will outsource someone else to advise them on managing their investments because they trust them to act in their best interests. This speaks to the fiduciary nature of the client’s relationship with their advisor.
4. Skill. This is often associated with stock picking. The logic behand asset allocation, choosing money managers and rebalancing the portfolio is not difficult to understand. There is a skill to picking individual stocks and knowing when to buy or sell. This is what people assumed stockbrokers did, 50 or 60 years ago. If you can find an advisor who is a skilled stock picker, they are a great find.
5. Keeping you legal. There is plenty of free tax advice available on the Internet. Not all of it is correct. As TV news has recently explained, some might reference a rule, but applying the rule when filing your taxes might be more complicated. You want to work with a financial professional who knows both what is acceptable and how the rule must be applied. CPAs are good at that.
6. Finding opportunities. A tax professional likely understands deductions better than you do. An experienced financial advisor might spot investment opportunities before the crowd rushes in. This is a skill professionals have, but amateurs do not.
7. Representing you. This is an area where accounting professionals shine. No one wants to be audited by the IRS. If you work with a CPA and they file your taxes, it is reasonable to expect they will appear on your behalf before the IRS if your tax return was audited. Lawyers to the same thing, representing you in court before a judge and jury. If the unthinkable happens, you want someone fighting in your corner.
8. Referral. The arrival of the Internet also gave us user generated reviews on sites like Trip Advisor. Many people trust the firsthand experience of others more than they trust corporate advertising. If a friend in your same social and financial position is very satisfied with a financial professional, you are open to working with them too.
9. Matters of life and death. This makes the case for doctors and other medical professionals. If the consequence of a wrong decision is injury or death, most people will not take that chance. They want to best advice possible and will trust the provider. Few people self diagnose for this reason.
10. Buying the right product in a confusing field. This makes the case for insurance professionals. There is something worse than not buying insurance and later discovering you need it. That is having bought insurance earlier, then discovering you are not as covered as you thought. Working with an insurance agent who understands you needs means you will likely have the coverage you need, if and when you need it.
Before you can get a person to pay more when buying through a professional, you need to understand their needs and unique situation.