In the early days of the independent advisory industry, virtually all advisors had been brokers or insurance agents in their previous careers.
In their prior lives, which largely entailed sales, most advisors received professional sales training. A major part of that training this rule: “Never talk about price, until you’ve fully explained what the prospect will get for the money.”
For younger advisors without sales training, I should mention that the reasoning behind this rule was simple; a prospect cannot determine if a price is fair without knowing what he or she is paying for. By not describing your products or services first, you run the risk that a prospect will form an impression based solely on price, which you’ll have a difficult time changing.
This old sales wisdom crossed my mind the other day, while I thinking about how owner advisors should talk to employees about new compensation structures. In my experience, most firm owners are inclined to talk about a new comp structure and get input before they decide on what possible revisions will look like.
This practice is a mistake. Like the salesmen of old, firm owners who talk to employees about compensation before they’ve actually created a new compensation structure are asking for trouble — often big trouble.
Here are some of the major reasons why:
1. The comp structure could change from what you were initially considering before you introduce it, which is usually a good thing.
But not always. Bad things can happen when some, most or all employees like the comp plan better before your brilliant changes.
The problem is that you effectively have given them a negotiating position against what you’ve decided to do. You must have thought the old plan was pretty good or you wouldn’t have told them about it.
Any good sales person will tell you, it’s a lot easier to sell something you firmly believe in than to persuasively explain why you’ve changed your mind.