In the financial services industry, discussions around cost often dominate headlines. Phrases like “3% annual charges,” St. James’s Place critiques, or the debate between passive and active investing frequently grab attention. However, these conversations can miss a critical factor: value.
This blog builds on my previous post about confirmation bias, exploring how we perceive and prioritise value when making decisions.
The Perception of Value
We all assign value differently based on personal preferences and circumstances. Take everyday decisions, for example:
- Cars: Is it worth buying new, or is a used car sufficient?
- Clothing: Do you choose high-street brands, designer labels, or something in between?
- Food shopping: Do you prioritise cost by shopping at a discount store, or do you prefer the convenience of online delivery?
Each choice reflects our thresholds for value—whether driven by status, quality, or practicality. No one should judge these decisions, even if it is surprising that some might pay hundreds for a designer shirt.
Everyday Services: Trust and Recommendations
We often hire professionals in areas where we lack expertise, like electricians or plumbers. For many, the decision is not just about cost but about trust. A strong recommendation can justify a higher fee because the outcome is worth the investment.
This principle extends to other services—finding a reliable mechanic, a skilled sports physiotherapist, or even a trusted childcare provider. In these cases, value outweighs cost, and we often pay more for confidence in the result.
Professional Services: Paying for Expertise
Regarding professional services, we make similar decisions based on need and complexity. For instance:
- Some people handle their tax returns because they are straightforward, while others hire accountants for more complex matters.
- Solicitors are not always necessary, but paying for their expertise makes sense when legal situations become challenging or unfamiliar.
Again, the decision often hinges on perceived value and personal recommendations rather than purely on cost.
The Consultancy Perspective
When I launched my consultancy, setting a daily rate was one of the hardest decisions. Without an established reputation or client recommendations, I started with a rate below the market average. Over time, as trust and results built my reputation, I felt confident in raising my fees—while still aiming to offer competitive value.
A client recently reassured me about this balance, saying, “The value you bring far outweighs the cost.”
Why Value Matters More Than Cost
The perceived push for lower costs under regulations like Consumer Duty is important but should not overshadow value. For example, a headline fee of 3% might seem excessive until you understand what it includes:
- Ongoing advice
- Portfolio management
- Personalised financial planning
- Platform costs
Simply comparing numbers can be misleading. The real question is whether the outcomes justify the cost.
Conclusion
Value should always take precedence over cost when evaluating any service—whether financial advice, professional consultancy, or everyday decisions. It’s not about paying the lowest fee but ensuring the service delivers meaningful, tangible benefits.
Understanding the nuances between cost and value can help us make informed choices and focus on what truly matters.
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