It is easy to assume we live in a transactional world. You have seen the TV commercial about the two guys checking out of a hotel. One guy got the lower rate because he used a website that aggregated rates offered on different sites. No humans involved. This implies you buy what you need from the lowest cost provider. Life does not work that way. Advice has value. It also comes with a financial cost.
Let us assume you are talking with a prospect about becoming a client. Here are 15 examples of situations where you choose paying for personalized advice over seeking out the lowest cost provider.
1. Medical care. Everyone goes to a doctor or emergency room when they are sick. They do not attempt to self diagnose. They bring the prescription from their doctor to their pharmacy. They trust the medical advice they receive. They do not have the knowledge to diagnose their own illness. They pay indirectly though health insurance premiums.
2. Legal advice. You have heard the saying, “A man who is his own lawyer has a fool for a client.” The legal system is complex. Having an adequate defense is so important, the Miranda Warning guarantees that right. You hope you never need legal representation, but you will pay for it when it becomes necessary.
3. Car repair. Some people work on their car in their driveway. Most do not. They bring their car to a mechanic or dealership where they have a relationship. Why? Because the mechanic or the dealer “knows their car.” They pay because they want the work done right.
4. Accounting services. You can file your own tax return. Many people work with a CPA because as your life situation becomes complicated, your tax situation becomes complicated too. You want to pay the least amount you are required to pay. Another compelling reason is the risk of an audit. If it happens, you want someone acting as your intermediary.
5. Property management. You have heard the expression “absentee landlord.” If you own property in another state or across town, you do not want late night phone calls about leaking pipes. You do not want to be a rent collector either. You pay a property management company to represent your interests.
6. Buying insurance. You can buy insurance online. You can buy directly, bypassing an insurance agent. Insurance is a complicated product area. There is a risk you could buy a policy that provides inadequate coverage. You work with an agent who understands your situation and recommends suitable coverage.
7. Getting your hair cut. This is a task you certainly would not do yourself. You tend to find a barber or stylist who understands what you like and can deliver a consistent result. You will even follow that person if they change establishments. You pay because they know what you want.
8. Buying wine. The sale of alcohol is regulated at the state level. You might buy your favorite scotch or bourbon at the store with the lowest prices. Wine is different. There are so many wines, you need someone with specialized knowledge to guide you. If you have a relationship, they often help you get hard to find wines or those on allocation. They can direct you to closeouts. They understand your preferences and see the bigger picture across the total market.
9. Getting a restaurant table. You have favorite restaurants. You become a regular and get to know the owner. You have those times when you need a table at the last minute and the place is fully booked on their website. You call the manager and they often find you something.
10. Babysitting. You are not going to let a total stranger look after your child. Neither will you let an inexperienced friend take on the job. Once you find a trusted, skilled person, you stick with them. You want to know your child is in the right hands.
11. Booking vacation travel. You might do basic tasks like buying plane tickets and booking hotels yourself. When trips get more complex (safaris, long cruises) you might turn to a specialist travel agent. They might be able to get better deals on the airfares if the cruise line buys a block of seats. There may be deals they know about but you don’t.
12. House cleaning. This also includes house sitting. You do not want a stranger inside your house, especially when you are not there. This often develops into a long-term relationship. Once you find the right person, you will pay to keep them.
13. Hiring a contractor. You have heard too many horror stories about home improvement disasters. You do not want the risk of cost overruns, the builders leaving in the middle of the job or the work failing inspection. You ask friends for recommendations. When you find a good one, you stick with them.
14. Pet sitting. This is similar to babysitting and house cleaning. You do not want stranger in your house while you are away. You do not want someone inexperienced caring for your dog or cat. Once you find a good per sitter, you stick with them.
15. Servicing your HVAC system. This also includes other crafts like plumbing and electrical work. You want someone who “knows your house.” You want continuity. They are work on systems they have installed or repaired before. Most important, you want someone who will come over immediately when you need them.
Some people view investing as transactional. They feel they do not need an advisor in their corner. There are many examples you can share where advice has both a value and a cost. When someone wants the first, the second part comes along too.