From the Desk of Paul

Valuing your Profession

Paul Betti,
Founder, Australian Financial Advisers (AAG)

Some years ago, I received a phone call from a potential client that was referred to me by an existing client who had told him that “if Paul can’t help you, nobody can!”

I contacted the client and thanked them for the referral. “By the way, no pressure,” I said with a smile!

There was a chuckle on the other end of the line.

“That’s why I referred them to you Paul, oh, and by the way, the hubby’s a hard nut to crack!”

“Nothing I haven’t dealt with in my time,” I thought as we said goodbye.

The prospective clients were about to buy an investment property and wanted advice on loan structures, budgeting and ownership options.

After the usual meet and greet, I advised them that our first meeting would be complimentary however they had to lay their cards on the table if I was to eventually help them.

So they did. ‘Hubby’ said he was in a very skilled technical profession.  He said he had over 30 years’ experience and was responsible for the outcome of the whole operation and that his clients depended on him for the right results.

He was also the kind that ‘kind of knew everything’.

His wife was a nurse, pleasant and very open to ideas.

I worked out pretty quickly that she managed the money, he made all the noise. After two hours, I was able to formulate a high level concept in my mind. However, I wanted to ratify it first with our internal accountant before I put the proposal forward. I proposed we meet again with these new prospects if they were prepared to sign a letter of engagement.

We discussed fees. She was nodding her head, he sat quietly looking at me like I had just stolen his car.

After they left, I spent a further hour with the accountant and once he confirmed my thoughts, I put a detailed plan together. We all met up a week later and we discussed the proposal.

I showed them how we could save them over 8 years in mortgage payments and over $150k in interest.

We also structured the asset ownership contrary to ‘hubbies’ ideas in such a way that provided them with greater deductibility on the interest.

In all it amounted to over $200k in savings all of which meant more into their super. I also showed them that they could retire 3 years sooner than anticipated.

She was visibly elated. She said she was tired of the night shifts, the long hours and the stress that went with the job. I sensed he never really gave this too much thought.

My fee was $10,000. A meagre 5% of the savings on the  strategy.

She was very happy with the outcome and was ready to proceed. I could however see that hubby was still pondering.  I knew what was on his mind.

So I said, “What part of the strategy would you like me to clarify?”

Without hesitation he said, “the fees, I would like an itemised breakdown of how you arrived at $10,000? It was only 5 hours you said?”

I smiled inside, I knew that it was his ‘ego’ not his hip pocket that was doing the talking.

After feigning a long pause to garner my thoughts, I said “Mr Smith (not his real name), I understand you have a heart condition?”

“Yes” he replied, looking at me wondering where this might go.

“Imagine then that today you have a choice that will change the rest of your life. The best heart surgeon in the world will perform life-saving heart surgery on you and because of that, you will live a long, prosperous and not to mention happy life. What price would you put on the value of your life”?

“We can’t negotiate these things” he retorted.

“You see Bill,” as I leant forward, “that surgeon will take just 5 hours to perform the life-saving operation and charge you $100,000, that is $20,000 per hour.

“It’s your choice, live or die. Which would you choose?”

His ego didn’t allow him to respond, so I kept going.

“After all, your health is the most important thing you could ever have, would you agree?” Still he listened.

“Your wife saves people’s lives everyday”.

I turned to Mrs smith, “as a nurse, have you ever saved someone’s who has gone into cardiac arrest?”

“Yes” she replied.

“Mr smith, have you ever considered her worth?”
He sat there slowly nodding.

“You see Mr Smith, I, like your wife value your health first and foremost above all else also. Because without it, all the money in the world that you may accumulate would amount to nothing. With your wife at her basic hourly rate and 30 years of nursing experience, if you were to suffer a cardiac arrest, how much would you pay her to save your life?

Without me, you would have your health and no wealth. With me, you can now have both. Would that be worth also your time to consider?”

He sat there, pondering. Slowly he nodded his head.

“Mr Smith, My fee is $10,000 and at 5 hours, that may equate in simple sums of $2000 per hour but you see Mr Smith, I have charged you just $1000 for the administration and document preparation. I too am in a very skilled technical profession. I too have had 30 years’ experience and am responsible for the outcome of the ‘whole operation’ and clients depend on me for the right results. Because of the 30 years of study, experience, research and knowing exactly how to do it, I have charged you $9000.”

The wife just smiled.
He smiled too.

Disclaimer: Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. Past performance is not a reliable guide to future returns. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

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