Here’s an interesting thought… say you need a service to cut down a dead tree in your back yard. You ask around with your neighbors and get the names of three local tree services. You invite each service over to take a look at the tree and offer a quote for doing the work. A couple days later you sit down to look at the quotes:
Amy’s Tree Service: $2000
Bobby’s Tree Service: $1850
Carl’s Tree Service: $750
Most people see those quotes and think, “there’s no way Carl is touching my trees!” How can his quote be so low? Does he even have insurance? What’s he hiding?
Now transfer this thinking to financial advice. Often, my fee quote will look a whole lot like poor Carl. If you have $2,000,000 and every advisor in town quotes you a fee around $20,000, but then Matt Jenkins comes along and says he can help you for $6,000, you may have some hesitation. This is perfectly natural. People are wired to distrust or look askance at anything that deviates too much from the standard way of doing things. Especially when it comes to something as important as your finances.
But what if I told you that Carl’s Tree Service had come up with some exciting and innovative ways of doing business? Maybe he makes efficient use of technology to handle the back office components of his business. Maybe his work crews have developed an more effective system for quickly and safely cutting down trees. Heck, maybe Carl happens to be a Jedi Knight and he can chop up the tree in two minutes with his light saber! That sort of innovation might change your thinking about hiring Carl.
And that applies to my business as well (well not the Jedi Knight part). I’m laser focused on efficiency and keeping costs low so that I can pass savings on to my clients. I use technology to handle many back office functions and I have developed efficient processes for serving clients so that I don’t waste your time or mine. This enables me to offer flat fee financial advice. Now contrast this with the many financial advisors using the typical 1% asset-based fee. These advisors don’t run efficient practices because they don’t have to. They earn so much revenue that focusing on costs and efficiency aren’t all that important. And it’s the reason many advisors are comfortable spending so much time on the golf course or taking clients out to the country club.
So the next time you encounter a service with a lower price, ask some questions and learn more about it. It may not work out, but you might also be surprised.
