Hello and thank you for tuning in to another episode of a
professional pricing Society podcast.
My name is Terrence may have another great conversation store
for you today. With a very, very special guest
who goes by the name of Michael Compton.
Michael is the director of firm strategy and leader of the new
pricing function at Edward Jones with 16 years and full service,
Financial advisory industry. Experience, mr.
Michael sir, how are you doing today?
Give a great. Thank you, Terrance.
It's good to be here. Good, thank you so much for
being here. We're so glad to have you.
Let's go ahead and jump into this conversation.
So you're speaking with us today about pricing with evolving
value within a professional service industry.
Okay? So this is a very interesting
topic. What why is pricing with
evolving value within the Professional Services industry
important for pricing professionals today?
Well, I was able to attend last Spring's conference and being in
the Professional Services industry.
I saw how sharing approaches and sharing, you know what's
happening in a different Industries was really
informative for me. So I thought when given this
opportunity I'd like to kind of talk about some of the
challenges that we see because I don't think I think it will not
only help folks in the Professional Services industry,
but might be able to, there's approaches in the discussion
could even apply to maybe some other Industries as well.
Well, as you as you think about the full serve it wealth
management, full service industry.
It's evolved so much over time. So go back to like 1980.
Like if you wanted to buy a stock or Bond or mutual fund,
you had actually call an individual and then you know,
all of a sudden, the end of the 90s come and we've got the
internet, you know, you could place a phone call.
So now we got day Traders, right?
So what do you mean a broker for Well, they're going to start
build it. Going to say, wait a minute, my
value prop is now building portfolios.
So, you know, that that went for a while, but then you've got
Robos, enter the industry and you've got these Hybrid models,
where you have someone in the home office kind of coaching you
through your investment. So why do you need to pay this
full service professional these higher fees.
So just the the value is changing over time.
And now I really it's delivering Personalized comprehensive
advice and guidance but our monetization or the way we price
that hasn't caught up to where the value prop is it just that
Evolution and how quickly it's changing over time.
I thought would be a really great conversation.
Sure, absolutely, absolutely. So, yeah.
So I want to ask is well, you know, just thinking about that a
little bit further and about the evolution of this.
What do investors value in a full-service wealth management
offering? Whirring compared to, you know,
do it yourself situations or other scalable models?
Absolutely. So when you when you go to a
full-service wealth management office, you're getting actually
a lot of services. You know there's what we call
custody in the industry where they custody your assets.
So if you own stocks bonds mutual funds, you know, they
custody this for you. They also in do investment
management where help you enter the market, a line.
Goals to your Investments but it's a lot more of that than
that is. Well if you take a JD Power
results on investor satisfaction for 2022, just hit and the way
they are starting to talk about the value proposition.
In this industry, it it's holistic.
Financial advice where there's a plan and that you have a
professional delivering that to you.
And one of the key things that we've seen in past.
This is if you have a professional delivering that
advice and guidance, it's almost like a coaching relationship and
they're holding you accountable so that you personally can meet
your goals mom. And one other thing that I took
from that survey that was interesting is the number the
third driver that they cite. As the third most of corn driver
is the value for the fees that they're paying.
That's what clients are investors are looking at.
And then I think I hit on it just a little bit.
Trust is such an important. Day, you're talking about your
money, your livelihood, how you're going to retire?
How are you going to put your kids through college?
Do you need to take care of your parents because they're getting
out a you know, they're getting their up in the years.
Like these are really, really important things that people
need to accomplish and having a trusted advisor.
That's, that's part of that value proposition where they can
kind of almost do life with you. So, very different from other
Professional Services Industries, but it's part of the
The overall value proposition and you see, clients will put
more emphasis on certain parts of that value proposition.
Where some clients are just looking for the Investments.
Some clients are looking for that personal relationship.
Some clients are really looking for that plan to give them
confidence that they can actually get there.
So it's really interesting, that is interesting, so it sounds
like this is heavily based on cultivating, a mutually
beneficial relationship a healthy relationship.
Exactly. And then now, think about how do
you how do you pay for Investment Services?
Yeah, you you pay for a stock trade, you might pay two and a
half percent for stock trade that you probably could do
online for free or $15. So it's you're in the situation
where you're almost like overpaying and then getting the
good stuff for free. Hmm.
That makes sense. It does make sense that's
interesting. Okay cool.
Yeah so there's the These Dynamics between us in our home
office that you'll run the business and our sales folks are
financial advisors. So Dave, they also need to keep
up with the evolving industry. So they have some clients that
put a lot of value on that, you know, stock recommendations kind
of like the way we used to do business in the 80s and then
you've got other clients that are just starting to save for,
you know, retirement. And it's more about our Saving
versus how they're saving. So, just keeping our sales force
in tune with the industry and where value is evolving over
time with their different segments of clients.
That's a really interesting Dynamic if you start to dig into
it and then also the amount of information investors have I'm
always and I'll probably do this pull in person, you know.
Do you know what you pay for financial advice?
And I'll tell you it is all over the place on that.
What that answer is. So it's very interesting.
The amount of trust their pudding with their financial
advisor, but the very limited understanding and how they pay
and then you as a professional prices, you know pricer in the
industry. How do you how do you you know
how do you reconcile these things?
A lot of trust is needed. Not too many of your clients or
customers understand how they're paying for advice.
You know how do you how do you manage pricing in this type of
Industry? That's into that.
It's a good point, you know, not everyone may be aware of how
their, maybe what they're getting for their book that
makes sense. Okay, exactly.
Now, you may have touched on this previously, just now but
what makes Professional Services pricing different from other
Industries. So you can think about think
about professionals like financial advisors or doctors or
lawyers, They typically run their business and I'm using air
quotes, I know you can't see it. But yeah, they have their their
Niche, they have their approach but we're providing guidance on
how they need to price their practices.
So it's interesting on, you know, how you have to almost be
a little bit of customized and how you approach pricing or you
need to segment your Professionals in the business to
be able to do that. So that's One interesting
Dynamic versus another, you know, like manufacturing might
have sales associates. That's an important Dynamic, but
it's not as I don't think it's differentiated.
As you'll see one financial advisor, or one doctor in their
practice versus another doctor in their practice.
And then the other thing that I think makes it really different
is the amount of Acumen that professional has.
So you have that professional enters the you know enters the
industry. They might have one to three
years of experience. It's versus the professional
that has 20 years of experience and there's a lot of value or
there's a lot of perceived value in that professional.
That has a lot of experience. So how do you quick for that?
When you're thinking about it? And then finally, when you're in
a Professional Services industry, the client or the
customer is kind of bringing some of the goods, to the cam,
you know, to the relationship. So in Investments, it's their
their Investments and their say, Names.
You know, and then another Professional Services like a
plumber. You know, they're working on
your stuff. So it's interesting where you
have that different Dynamic that you would in other industries.
That is interesting. Very, it's very unique.
It sounds like in comparison to other Industries have there been
any specific approaches you've taken towards pricing
Professional Services. So so one of the one of the
other reasons that I was excited to do this is I just wanted to
share some of my experiences. Has with other professionals,
because our pricing team within firm strategy is only two years
old. So we, you know, over time as
the industry has evolved firms, like mine have owned more and
more of their pricing. So, before used to be dictated
by regulations and government and more boring or product
partners that create like mutual funds or Insurance products.
Now, we're owning more and more of our pricing.
So I made the case to my senior leaders that we really need a
pricing function now and it's not something you see a lot in
the financial services industry, some of the larger players have
it but a lot of them don't. So I just want to share my
experience on, you know, how did we build that?
So just to give you a little bit of preview of, you know what,
we're going to talk about how important is it to stay close to
white papers in the industry and what's in the news because
there's a lot of innovation going.
Going on mom. So we, we have a lot of
relationships outside of our organization where we're talking
to individuals that, you know, right.
These white papers or are in other parts of the industry like
Morningstar data is super important.
So the data that you know I'll talk a little bit about the
types of data that we buy externally to really understand
what's happening in the industry versus the type of data that
Create in our firm to understand what clients are paying for this
financial advice and kind of matching that up the value.
We're going to talk a little bit about focus groups you know I
was with my sales teams with potential investors with
clients. How does that factor into
pricing? And then I've got a really great
analytics team where, you know, we build all sorts of financial
models. And as well as just capabilities
that we embedded different parts of our business.
And then finally communication is so important and this is
actually where I'm going to share, kind of like some key.
Learnings things did not go well in a couple of instances and why
I think communication across a year, you know your firm and
your home office across your sales team and then being super
transparent with your investors and clients is so so important
because the more we Understand the better.
We all stakeholders are in these conversations and leads to
better pricing decisions in my opinion.
One, quick question for you. We know think about the, you
know, the professional service industry, do you foresee other
companies within this industry to apply or to pick up this type
of mentality or approach when it comes to pricing.
The pricing functionality? Absolutely, I starting to see it
at least in our industry and the industries that kind of a join
our industry. I'm starting to see it in
Consulting engagements where I in those are those are usually
kind of like a front-runner of what you'll see kind of built
out as a capability within different firms.
So as we partner with different consulting firms, or just
reading their white papers that they published publicly, I think
this is, you know, this is a direction that a lot of our
firms are going to start. Art going towards for a couple
different reasons when you think about the what some of the
important Dynamics and Professional Services part of
its capacity, right? So, a professional only has so
many hours in a day and you know, how do you think about
that and price price for that? And then on top of that
innovation has just really started picking up, right?
And so, what should invest, what should your clients and your?
Customers kind of be able to do on their own versus, what should
the /. You know, the professional be
doing just understanding, you know, cost structures costs to
serve. You know, how pricing is
perceive key drivers in economics.
It's all really important. So I think this very broad
approach that I'm getting into is really important to have
something like this in place to be able to keep up with an
evolving industry. Yeah, that was my assumption.
Ian but, you know, I can it's not fair to just assume it's you
know after it makes the most sense to ask the ask the experts
first and foremost about the future.
So that makes a lot of sense. That's important to know moving
forward regarding this particular industry.
Now you have years of expertise in this field what makes you
excited to be in a pricing role within a professional service
industry? Giving all your expertise and
years we have behind you. Yep.
So one of the things that makes me excited about, even though
I've been in the industry for quite a while touching pricing
most, most of the time I've been in the industry, what makes me
really excited is that Innovation we just talked about
like, it's Innovation, is unlocking value and it's not
only benefiting my firm, it's benefiting our sales force.
And in the end, I think clients are getting a lot.
Or value. And one of the reasons I really
enjoy the role that I'm in as a pricing, professional is, how do
we create a win-win situation where there's tens of millions
of investors across North America and being able to
achieve? Their goals is really important
to them. So I feel like I'm on the front
line, trying to figure out the Innovative innovative ways to
price Us our services so that we create more win-win situations
from all stakeholders. So that's really what gets me
excited about it and it in just the speed of change that we're
seeing in our industry. Yeah that's awesome.
Innovation is huge especially when it comes to industries that
you know as a at-large having all necessarily picked up this
concept yet. So I think there's a lot in
store for the professional service industry.
I think so. I've been talking a big game
here. But I think Financial Services,
there's a lot of room for improvement just across the
board. So that's that's something else
like that makes me really excited about this role.
The role that I'm in being in pricing and Professional
Services is I see a lot of room for improvement and I want to be
part of that. Mmm, good.
Good. Well, hey that's why we have you
here now. Michael, do you have any
additional resources or anything that our listeners can get, you
know, learn more about you or your company or your ideas, all
right, so So I don't know if we're gonna do this but happy to
put my LinkedIn information out there, so feel free to contact
me. Yo, I think it is in the
beginning. You mentioned that I work with
Edward Jones, so we're actually in, we have more locations than
McDonald's. So I you have to have one of our
Edward, Jones offices near you. So, but it just look us up.
Go to Edward Jones.com, you can take a look.
You know, our firm but really what I'd like to encourage folks
to do is if you are interested in the financial services and
the Dynamics here, there is a wealth of information that is
created by by firms like JD Power Morningstar, just just
start googling and there's a lot of really good information out
there. But if you are interested in
specifics, I would ask you to just reach out to me through
Linkedin anything Michael calm Owen.
Well thank you so much for your time today, sir, pricing with
evolving value, in a Professional Services industry.
Very insightful discussion we had with you today.
Until next time, you will have a safe one.
Bye-bye.