Pershing published a new white paper focused on adviser business models and the challenges of differentiation, titled “Advisor Value Propositions: How Advisors Showcase Their Value to Investors—and What Investors Secretly Think.”
According to Pershing, many advisers assume that defining a unique value proposition is important to growing a business sustainably over time. And they are correct in this assumption, given that clients say they are attracted to advisers that can stand out from the crowd and deliver services tailored specifically to their needs.
However, Pershing researchers warn that it is far harder for advisers to convey the uniqueness of their value propositions than is commonly assumed. In fact, over 60% of investors think that all advisers make more or less the same promises, in turn making it hard for them to tell the difference between even between firms that run very different operations.
The paper steps through an independent review of Barron’s 2017 publication, “Top 100 Independent Financial Advisors’ Websites,” noting that more than a quarter of the websites claim the respective firm is unique for its offering of “comprehensive portfolio management.”
According to Pershing, a quality value proposition combines four elements. It spells out the character attributes of the firm, the benefits clients receive from working with the firm, a rational argument for the firm’s strengths, and also an emotional component.
“Advisers need to speak more loudly about trust, accountability and transparency,” the paper says. “Trust is a critical issue to clients. However, they are almost evenly split on whether they believe advisers truly look out for their best interest.”
According to Pershing researchers, one “remarkable” trend in this survey data is the “growing importance of happiness, enjoying life and feeling good about their wealth.” Fully seven in 10 advisory firm clients say it is very or extremely important to have a financial plan that addresses their life goals, not just their finances. They want advisers to make them feel confident, self-assured and empowered.”
Pershing finds advisers are broadly underutilizing social media as a tool for promoting their value propositions. According to the survey data, over 40% of investors (and 73% of younger investors) turn to Google as a first step to research advisers. But most advisers are doing very little to optimize their Internet and social media presence.
Many different approaches can work here, Pershing says, but an adviser’s online presence should make certain things clear to potential clients. These include but are by no means limited to what the adviser’s ideal client profile might be; what specific problems the firm can solve for clients; what motivates the adviser to solve these specific challenges; why prospects should choose this firm rather than others; and evidentiary reasons why the adviser’s claims are believable.
“One in three investors has looked at an adviser’s personal Facebook page, and more than half of them decided not to work with an adviser as a result,” the paper says.
Pershing reminds advisers how the only way to know what investors really want is to ask them—and repeatedly.
In terms of taking action, the Pershing white paper urges advisers to create a “phrase cloud” or “word cloud” that breaks down the language usage in client-facing materials in an easy-to-digest way. Importantly, the Pershing report includes a composite word cloud for the Barron’s Top 100 firms, against which individual firms can compare their own results. There are many free word cloud or phrase cloud generators online, researchers note.
According to Pershing, advisers may be surprised to learn just how close their phrase cloud resembles the composite. Many firms will find they are overusing certain words and phrases that do not resonate with potential clients, while they are under-emphasizing others that are more important.
The full paper can be downloaded here.