By Neal Sinclair, Business Development Manager at Glacier by Sanlam
Your value proposition is the primary reason your clients and potential clients buy from you. It should therefore explain how your service or solution solves their problems or improves their situation. In essence, it’s the reason they should buy from you and not your competitors.
Your value proposition should focus on your clients, and not on yourself. It’s therefore not a slogan describing your business, or a list of your qualifications, or even claims relating to your character. In the world of terminology, whereas alpha and beta are the excess return over the benchmark and the market return respectively, “Gamma” refers to the additional value that investment and financial planning provides by helping clients make better and more informed financial decisions.
Goals of your value proposition
Your value proposition should serve to attract new clients, service existing clients and grow the value of your business.
Why is Gamma so important?
A number of industry studies highlight the importance of Gamma:
- The University of Montreal estimates that the saving of an advised client will be 2.73 times larger over a 15-year period than that of a non-advised client.
- USA-based Russell Investments estimated that advisers can add 4.4% per annum in net returns for clients by preventing behavioural mistakes.
- The International Longevity Centre stated that clients who received ongoing advice had retirement wealth that was 50% greater than those who took once-off advice.
- Investment management company Vanguard estimated that advisers can add over 3% per annum.
Your value proposition comprises building the financial plan, executing the plan, ongoing services and soft skills – all with the idea of Gamma at the centre, holding everything together.
Let’s take a closer look at these elements of the value proposition, and their components:
Building the financial plan:
| Total wealth / comprehensive view of and estate | Provide timelines and manage expectations |
| Comprehensive plan | Cash flow modelling |
| Step-by-step implementation | Client’s choice of platform |
Executing the plan:
| Consolidate information and document the plan | Decumulation strategy, tax efficiency, asset/liability matching |
| Communicate, provide clarity, direction and confidence | Simplify language and avoid jargon |
| Asset allocation and risk tolerance | Budget interrogation |
Relationship management and soft skills:
| Show empathy | Work with speed, skill and professionalism |
| Honesty and integrity, become a trusted confidant | Ability to ask the right questions |
| Be objective | Simplify concepts |
Additional components:
| Digital strategy | Back office and continuity |
| Additional resources | Industry best practice / legal framework |
| Value proposition – accessible and documented | Service level agreements |
Each one of the elements listed in the tables above enhances the overall Gamma factor, or additional value created for the client by the investment and financial planning that you do for them.
Comparison between an advice-driven model vs a non-advice-driven model
| Non-Advice | Advice |
| Fee driven | Value driven |
| Limited options | Personalisation |
| Default options | Needs and goals driven |
| Limited touch points and access | Customised to the client |
| Transactional relationship | Trust relationship |
Measuring Gamma
Successfully implemented, the end results will reflect additional income, tax savings and additional savings for the client.
The benefits for the adviser include growing and protecting your revenue stream; positive referrals; creating a ; building trust; negotiating power; and protecting your client base.
References:
The gamma factor and the value of financial advice – C Montmarquette and N Viennot-Briot, University of Montreal
Alpha, Beta, and Now…Gamma – D Blanchett and PD Kaplan, Morningstar
Contributions by:
Kritz Coetzee, Regional Manager: South at Glacier; and Glacier Business Development Managers Rainier van der Nest, Werner Vlok and Dries Human
