Executive Summary
When it comes to buying a product, most are relatively straightforward to evaluate. They have a physical presence that can be examined. We can ask others who have purchased and still have the product what they think of it. And there are usually many ways to assess quality. With a service, on the other hand, what the prospective client buys is intangible, and the service provider – like the financial planner – is effectively forced to be “selling the invisible” to a prospective client.
Accordingly, Harry Beckwith’s book “Selling The Invisible” tackles the interesting challenge of how best to sell an intangible service (like financial planning)… with the conclusion that in the end, because there’s no real way for most consumers to evaluate the quality of a service or the depth of someone’s expertise in the first place, the driver in the end is usually not about the skillset of the financial planner. Instead, decisions are often made based on far more “mundane” factors like whether the prospective client feels a personal connection and relationship to the advisor, to even simple details like how the advisor dresses, the look of the office, or the way the receptionist answers the phone.
On the one hand, the fact that an advisor’s actual expertise may rarely be the deciding factor in whether he/she is fired may be dismaying to some. Yet on the other hand, the reality is that the factors that prospective clients may rely upon instead are generally under the advisor’s control as well, and there aren’t even that many (the firm’s website, the person who answers the phone or greets people when they enter, the physical office, etc.). And in the end, Beckwith makes the key point that ultimately the real challenge that advisors face is not convincing clients to work with them over other competitors, but simply that it’s worthwhile to “buy the invisible” instead of doing nothing at all!
The Challenge Of Selling “Invisible” (Financial Planning) Expertise
In his book “Selling The Invisible: A Field Guide To Modern Marketing”, marketing guru Harry Beckwith takes a fascinating look at the unique challenges of selling a service – which, unlike a physical product, is “invisible” and intangible, and thus is especially hard for consumers to evaluate. You can’t judge a service by its look and feel and quality, and you can’t look at what someone else purchased to evaluate it, the way we can a product. And in the case of sophisticated expertise services like financial planning, consumers don’t even have a clear basis to judge the expertise, either; how, really, do you know if someone is truly an expert at what they do… at least, until after it’s too late?
In fact, Beckwith makes a compelling case that because it’s so difficult for consumers to judge the value proposition and expertise of a service provider, the greatest “competitor” for most – including financial planners – is not actually other service providers (i.e., other financial planners), but simply client inertia and the desire to either do nothing, or get something done but just do it themselves. Doing nothing is easy, doing it yourself is “free”, but hiring a professional is an uncertainty, an unknown quantity, and something that is almost impossible to know because the service is invisible.
Given this difficulty, and the demands on time for most people, Beckwith points out that in practice consumers rarely even look to make the “best” choice (because it’s almost impossible to know which service will be “best”, anyway); instead, most people will satisfice by just looking for a solution that will be “good enough” to address the issue. Similarly, because we fear the unknown, we may be far more likely to buy the service we fear the least – the one that is least risky, and most certain – rather than the service that “might” turn out to be the best but has a more uncertain outcome (a mediocre known may be preferable to a potentially-superior unknown!).
How Do Clients Evaluate A “Good” Financial Advisor?
The key point from Beckwith’s perspective is that because “invisible” services are so difficult to evaluate, most people don’t actually make their purchasing decision based on the expertise of the service provider; instead, they evaluate the relationship they have with the person instead. In other words, if you don’t have the expertise to evaluate the expertise of the expert, you evaluate what you can – the relationship, how much of a connection you feel with the person, their integrity, and whatever limited outwards signs there are that they might provide good service (e.g., promises are kept, and phone calls returned promptly).
In essence, this means that when a prospective client is considering an intangible service like financial planning, they may especially focus on what is “tangible”, from how the advisor dresses, the look of his/her office, and the firm’s marketing materials and/or website, to how the staff answers the phone and the quality/clarity of the communication.
In point of fact, the reality is that most clients have relatively few points of contact in which they can possibly form a first impression – the advisor and his/her business card, the physical office space, the website, and how the phone is answered – and thus it pays to pay attention to those details, as when there is so little that is tangible for the client, those few items may have a highly disproportionate impact on the client’s decision about whether to do business or not. And an advisor that fails at just a few may lose out to another firm that executes the communication and relationship-building process ever so slightly better (regardless of which advisor is the more knowledgeable expert!).
Strategies To Make Your Invisible Financial Planning More Compelling
So given the dynamics and challenges of “Selling the Invisible” as Beckwith highlights, what should financial advisors do to make their service offering more compelling to prospective clients – recognizing the difficulty that prospective clients will have in actually evaluating a financial planner and his/her expertise and services in the first place?
While it may be “obvious” to many that we as financial planners are in the relationship business, it bears remembering when really considering the touch points that a prospective client may have with you and your advisory firm. For instance, if you’re really focused on building human connections, does your website have pictures of you and your staff so prospects can make a visual connection? And for that matter, if a client’s first impression of you is your website, is it up to date and professionally done? Alternatively, if you really expect your client’s first impression will be calling your office or coming in for a visit, how much time do you spend training with staff about how the phones should be answered, and how prospects should be greeted when they enter your office? And have you carefully considered the décor of your office? As Beckwith emphasizes, these seemingly trite details may have far more impact than you realize in your prospective client’s decision about whether to work with you; as the saying goes, there’s no second chance to make a first impression!
Similarly, to the extent that prospective clients will drive their decision by their relationship and connection to you (because they can’t really judge your expertise), it’s especially important that prospective clients really understand not just what you do, but why you do what you do. As Beckwith puts it: “Prospects do not buy how good you are at what you do. They buy how good you are at who you are.” In other words, when you do talk to clients about yourself, start with the “why” first. Conversely, because people feel more trusting once they feel they have been understood, your ability to talk about what you can do (or why you do it) is still less important than being able to show that you simply understand what the client needs in the first place and make them feel heard.
In addition, because those purchasing a service may have relatively “little” to go on in making their decision, Beckwith emphasizes the importance of branding and advertising. Prospects who have already heard of you and your company are more likely to trust if they’ve “familiar” with you, and Beckwith notes that familiarity of brand is especially important in our increasingly time-starved lives (where we have less and less time to thoroughly research a decision, and therefore are even more likely to rely upon gut feelings and brand trust). In turn, this implies that it is especially important for advisors to have a niche or focus, because it allows the firm to create a clear brand and value proposition with a core clientele, and become familiar and known in that community (given that few have the financial capital to advertise “everywhere to everyone”!).
Beckwith also points out that because the decision to buy a service will feel like a “risky” proposition for the prospective client (“how do I know if I will really get a service that was worth paying for?”), it’s important to do what you can to make the transaction feel less risky. For instance, Beckwith suggests offering a trial period or test project; in the context of financial planning, that might mean not insisting that clients do a comprehensive financial plan up front, and instead offering a modular financial planning service for a standalone fee, such as a 2-hour Social Security review and analysis for $300, and only then invite the client to consider a more comprehensive financial planning solution after you have demonstrated your value proposition. The client gets a valuable service, you have the opportunity to build a deeper connection and provide a more tangible outcome for a heretofore invisible service, and “at worst” you’ll be paid for your time and part ways.
Similarly, if clients are afraid of the “risk” that hiring an advisor will turn out to be a waste of time and that they would have been better off to just do it themselves, Beckwith notes that it can be especially bad to criticize competitors; while it might feel like you’re making the point that you’re better than the competition, you reduce the client’s trust that anyone will be able to do the job well. In other words, degrading your competitors (e.g., by questioning their compensation methodology, or their fiduciary status) may make the prospect less likely to work with your competitor, but it doesn’t make them more likely to work with you… it makes them more likely to work with no one.
Ultimately, “Selling The Invisible” is not really specific to financial planners (or even the financial services industry), and in point of fact it is somewhat “dated” – having been written in 1999. And for some, it may be dismaying to hear how little of the decision about whether to hire you as a financial planner has to do with your actual expertise as a financial planner. Nonetheless, Beckwith’s ideas and insights about both the challenges and opportunities in how to effectively market an intangible service like financial planning remain remarkably relevant, and in fact presaged the rising relevance of “behavioral finance” research that has become more popular in the past decade (e.g., many of Beckwith’s tips about positioning and branding are all built around the kinds of mental shortcuts our brains take in making complex decisions). If you’re struggling to market and grow your own advisory firm, "Selling The Invisible" definitely worth a read.
So what do you think? Have you ever read Beckwith’s “Selling The Invisible”? Do you think the points about the difficulty of selling a service – as opposed to a product – are salient and relevant? Would you consider marketing and communicating the value of your practice differently, recognizing that – like it or not – prospective clients may make their decision based on other points beyond just your actual knowledge and expertise?
Great article Michael, thank you!
Thanks Ronald! I hope it was helpful food for thought! 🙂
– Michael
Michael,
As you know, Beckwith’s book came out in 1997. It was one of several I read very carefully when I co-wrote The Trusted Advisor in 2000. Like most very good books, it holds up very well, because most of the lessons are timeless.
However, the passage of time has made one thing clearer: in my view, the critical issue facing financial planners has moved from marketing to sales.
Marketing was always well-suited to create branding; and is a good entree to product-based businesses. But, as you point out, financial planning clients are making their decisions less and less based on expertise, which leaves – personal trust.
Your discussion of Beckwith’s ideas, while perfectly correct and useful, are nonetheless mired in a paradigm of product – you’re seeking ways to make people feel like they can trust the product.
But the product is not the issue – the planner is the issue. Clients are not only cynical these days, they’re educated. They know about portfolio balancing, index funds, and efficient markets. They are inclined to be cynical about any product claims, and further, cynical about people who make product claims.
What they ARE impressed by are planners who actually, really, seriously, gosh-honest, put the client’s interest first. This is still a rare trait in financial planning (less rare than among lawyers, but more rare than among, say, management consultants). Most planners still believe in ties, mahogany desks, large printed portfolios, and the occasional technical voodoo language. Behind closed doors, those planners pay attention to their own margins on products, and all too often this attitude bleeds through.
Client-focused planners, and there are some, actually start by asking what is best for the client. Period. If they don’t have it, they’ll refer the client to someone who does. If they make more money at the expense of the client than a better product, they won’t sell the client that product. They know that the “fee only” battles have little to do per se with the client focus of the planner.
The point of all this is, at the risk of over-simplification – the issue today is not marketing, it’s sales. The issue today is not product, it’s service. The issue today is not the plan, it’s the planner.
Marketing (including social media) is good at creating what one scholar called broad trust. But sales is good at creating what’s called deep trust. It used to be that people trusted Merrill Lynch; now they trust – or they don’t trust – a particular financial planner who works for Merrill Lynch (or used to).
I don’t mean this as a dump on Beckwith; indeed, he makes much the same point in one of the sections you quote, about the importance of the “why,” and of who you are. But it’s that section on trust, not the rest about marketing, that has become more important in the 18 years since the book came out.
Charlie Green
Trusted Advisor Associates
I’ve been waiting to see what you thought about this book ever since I noticed that you were reading it. The book was on a recommended reading list I was given when I attended Coach U. I believe I even have it on audio 🙂
Honestly, I found it very depressing that my knowledge and hard-earned experience didn’t count anywhere near as much as the ability to connect. Fortunately, this ability can be learned 🙂 even if you are an introvert!
Most people, IMO, want to trust, which is one of the reasons why the ABOUT page is the 2nd most read page on a website. People who are looking for a service read about a person and connects with their history, experience, where you come from, what your hobbies, are etc. for all the reasons mentioned in your article and the book.
Trust develops a little at a time and is a wonderful gift. However, it does help to do things to make you more trustable, too. In my business, I’ve found that it’s been very helpful to offer new client the option of providing them with a confidentiality agreement vs. just saying that our work and the fact that I’m working with them is all confidential.
Having a marketing funnel helps, too. It goes back to giving people the option of testing you out.
If someone finds your website first, your marketing funnel may start with a newsletter or blog subscription with an offer geared to your niche. Then emotional buying ends at $27 or $37 depending on the erson, so offering something at that level is beneficial and so on. ($197, $297, $397 and so on into the 10’s of thousands)
When someone has a more in-depth connection – they hear you peak (in person, on the radio, video on your website, etc.) I find that people ether like you or not. Because this connection is deeper than just reading a website, your marketing funnel doesn’t have to be so detailed. People are more apt to buy at a higher price point because they feel that they know you.
Of course, your marketing funnel’s price points are determined by (and here it comes again) who your niche is and more importantly, who your ideal clients are within that niche.
The marketing funnel also different when it comes to referrals although I’ve seen advisors forget that they need to court these clients as they did the person who did the referring and not rush the process. Letting the person referred set the pace.
Michael, you mentioned business cards…. yahoo or hotmail email addresses do not build trust. Domain name on business cards do. When I was designing my own business cards, people said they were cute. When I hired a designer I’d have people ask me questions about what was on my cards! Hey, conversations with strangers and being able to refer to other business owner
helps build trust, too.
Because of the fear factor in hiring any service provider, it’s good to give the prospect more power by providing options for the different services offered (usually 3 works well – good, better, best or bronze, silver, gold, etc.). Some will buy the good; and over time move to better or best as they trust you. Others will buy (mostly) the middle service offered, and some will buy the highest priced package (figuring that it contains more value and they want more value).
Michael, have you read Alchemy of Fear? It is another oldie that I’m currently reading. Very interesting read about fear and how it manifests in organizations.
Talking about packages of services. Turn services into something that resembles a product – something they’re more used to. Productizing your different services. So instead of calling (for example) it an onboarding process — give it or the parts of it an appropriate and easy to remember 2-3 word names. It could be as simple as sending a client a “Welcome Package” that contains “x” “y” and “z”.
Just a few thoughts
P.S. I highly recommend that advisors read books outside the business to gain new insights. Especially books about consulting. There is so much advisors learn from authors who are not advisors but “get” business.
it’s very gratifying to read a review of a book that I finished writing in December, 1995–months short of 20 years ago. Yes, selling the prospect and serving the client have become more important since then. That is what prompted me to cover those subject in more detail in the two books that followed. And it’s what has prompted me to start fresh this year, and write a new book. I welcome any suggestions that you and your readers here have. And thanks for your kind words here, and best of luck to you–Harry Beckwith
I read this book back in 2001 when I heard another financial advisor speak and recommend it. It completely changed how I approached marketing. Around six years ago I studied my MBA and one of the subjects was Services Marketing and it covered a lot of stuff that Beckwith mentioned in his books.
Selling The Invisible still sits on my bookshelf and I still refer to it.