When it comes to products, most are relatively straightforward to evaluate before you buy. They have a physical presence that can be examined. We can ask others who have purchased the product for their opinion. There are usually many ways to assess quality. With a service, on the other hand, what the prospective buyer purchases is intangible, and the service provider — like a financial planner — is effectively forced to "sell the invisible" to a prospective client.
Accordingly, Harry Beckwith's book "Selling The Invisible: A Field Guide to Modern Marketing" tackles the interesting challenge of how best to sell an intangible service. He concludes that because there's no real way for most consumers to evaluate the quality of a service or the depth of someone's expertise in the first place, the driver of the purchase in the end is usually not about the skillset of the service provider (read financial planner). Instead, the buying decision tends to be based on more mundane factors like whether the prospective client feels a personal connection to the advisor. The factors include even simple details like how the advisor dresses, the look of her office or the way the receptionist answers the phone.
On the one hand, the fact that an advisor's actual expertise may rarely be the deciding factor in whether he is hired may seem dismaying. On the other hand, the factors that prospective clients may rely upon are generally under the advisor's control, and there aren't even that many factors (the firm's website, the person who answers the phone or greets people when they enter, the physical office, etc.).
In the end, Beckwith makes the key point that the real challenge advisors face is not convincing clients to work with them over competitors, but that it's worthwhile to "buy the invisible" instead of doing nothing at all!
Selling "invisible" (financial planning) expertise
In "Selling The Invisible" (now available in paperback and in Kindle and audiobook versions), Beckwith takes a fascinating look at the unique challenges of selling a service which, unlike a physical product, is invisible and intangible, and thus especially hard for consumers to evaluate. You can't judge a service by its look and feel and quality, and you can't look at what someone else purchased to evaluate it, the way we can a product.
In the case of sophisticated expertise services like financial planning, consumers don't even have a clear basis to judge the expertise. How, really, do you know if someone is truly an expert at what they do?
In fact, Beckwith makes a compelling case that because it's so difficult for consumers to judge the value proposition and expertise of a service provider, the greatest "competitor" for most providers– including financial planners – is not other service providers but rather client inertia to either do nothing, or get something done but just do it themselves. Doing nothing is easy, doing it yourself is "free," but hiring a professional is an uncertainty, an unknown quantity, and something that is almost impossible to know because the service is invisible.
Given this difficulty, and the demands on time for most people, Beckwith points out that in practice consumers rarely even look to make the "best" choice because it's almost impossible to know which service will be "best." Instead, most people will be satisfied by just looking for a solution that will be "good enough" to address the issue. Similarly, because we fear the unknown, we may be far more likely to buy the service we fear the least – the one that is least risky, and most certain – rather than the service that "might" turn out to be the best but has a more uncertain outcome (a mediocre known may be preferable to a potentially-superior unknown).
How clients evaluate a "good" financial advisor
The key point from Beckwith's perspective is that because "invisible" services are so difficult to evaluate, most people don't actually make their purchasing decision based on the expertise of the service provider. Instead, they evaluate the relationship they have with the person.
In other words, if you don't have the expertise to evaluate the expertise of the expert, you evaluate what you can – the relationship, how much of a connection you feel with the person, your sense of their integrity and whatever limited outwards signs exist that they might provide good service (e.g., promises are kept or phone calls returned promptly).
In essence, this means that when a prospective client is considering an intangible service like financial planning, they especially focus on what is "tangible," like how the advisor dresses, the look of his/her office, the firm's marketing materials or website, how the staff answers the phone and the quality/clarity of the communication.
Most clients have relatively few points of contact on which they can form a first impression: the advisor and his/her business card, the physical office space, the website and how the phone is answered. So when there are so few tangible external clues, those clues have a highly disproportionate impact on the client's decision about whether to do business or not with the advisor.
An advisor who fails at just a few of those externals may lose out to another firm that executes the initial communication and relationship-building process ever so slightly better (regardless of which advisor is the more knowledgeable expert).
See also: Build your charisma in 4 steps
Strategies to make your service more compelling
So given the dynamics and challenges of "Selling the Invisible," as Beckwith highlights, what should financial advisors do to make their service offering more compelling to prospective clients?
While it may be 'obvious' to many that we as financial planners are in the relationship business, it bears remembering when considering the touch points that a prospective client may have with you and your advisory firm.
