“A cynic is a man who know the price of everything and the value of nothing.”
Since Oscar Wilde lived from 1854 to 1900, he made this observation long before price comparison websites, no-load funds and commission free trading was invented. Advisors often encounter people who push back on pricing. What can you do?
Who Are These People?
These prospects have been around forever. They think the world is out to cheat them. They give their mechanic a hard time. The plumber, too. They ruthlessly bargain at flea markets. When they travel, they think everyone they meet is going to overcharge them. Guess what? They invest, too.
What to Say When Prospects Push Back
Some advisors will get into a price cutting war. The prospect will say “can you match…” You’ve seen wireless carriers doing the same thing. More on that later.
1. Build common ground.
I would say to prospects: “You need to understand how we make money.” If I was explaining stock purchase, it’s commissions. It’s added on, like sales tax when you buy wine. If it’s a bond purchase, there’s a wholesale to retail spread, similar to buying milk at the supermarket. Getting the fees out from reduces anxiety.
2. Transparent pricing.
The industry moved away from transactions many years ago. Many accounts utilize asset-based pricing. It’s easy to explain. Although investing is meant to be long term, pricing is “pay as you go.” If you decide to leave the program, you only pay for the time you were in it.
With wireless plans, you might have a “free phone” but you are locked into a multiyear contract to pay off the phone.
3. Common sense.
Prospects might bring up no-fee transactions. This implies there’s a monastic order running the operation, collecting no wages. They are still making money. The fees are hard to find or discovered later.
Back to the wireless provider example. Your bill isn’t usually just the quoted fee. There are out-of-network calls. Taxes. Additional services. No one is working for free.