Perhaps the biggest boom of the Internet Age (from the consumer side) has been increased access to free information and services. From medical diagnosis and legal counsel, to music and movie streaming, the public has grown accustomed to getting things fast and at no charge. In light of this, many industries have struggled to devise a fair pricing model to keep them in business. What about financial planning? Should advisors be giving away their services for free? Is this a business model which can sustain itself in the long-term? Can a software application or a website substitute for real person-to-person advice about financial planning?
The reality is the financial planning business could not survive long by giving away the store, but the “free” concept, known as the “freemium” model, is not new to business. There is an upside and financial advisors could very well gain traction by providing clients free financial advice, while simultaneously selling them financial products. Done properly, this approach could prove to be an effective marketing strategy and a good way to increase business. Providing practical financial planning solutions to clients ensures the financial planner is managing his/her clients’ assets for the long haul. It creates opportunities to offer additional products and financial services and helps form a trusting relationship. The notion that giving away something for free undermines its value makes sense, only if the client sees the free product as being valueless. Your advice has value and your client knows it.
This approach may not appeal to all financial planners or even to all clients. One potential drawback is the common perception that free means there’s a catch buried somewhere in the fine print. It may turn off potential clients who don’t want to spend the time figuring out what that catch might be, even when there isn’t one. As long as financial advisors are upfront about the costs of the products and financial services they do sell, then there’s no reason why a mix of free advice and paid services can’t give them an edge in a competitive market.
The goal for any financial services provider is to not only gain the business of the client, but to gain their trust. The only way to do that is by providing a valuable service. In return, financial advisors will get a long-lasting business relationship that is beneficial to both parties, regardless of the pricing model which may have been used to entice the client in the beginning.
Summit Brokerage Services is part of Cetera Financial Group, RCS Capital Corporation’s (NYSE: RCAP) retail investment advice platform.
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