When Clients Trust Your Advice But Not Your Business
Trusting Advice vs. Trusting a Business
In nearly every industry I work with, practitioners describe themselves the same way: “we are trusted advisors to our clients.” The “trusted advisor” model is seen as both an attained aspiration and a necessary part of doing business. But when I look across the professions, I see an interesting dichotomy where clients simultaneously trust the advice of the individual or team while growing deeply un-trusting of their firms’ business practices.
Consider the following examples:
Law
Clients will engage lawyers for highly sensitive disputes and trust their guidance. But when it comes time to bill, the attorneys use inflated rates and time-billing practices so arcane clients literally have to buy software to understand them. Clients then push back on the total fee, agreeing to pay only a portion, and driving down collections and realization rates for the partners involved. After a period of negotiation, both parties eventually arrive at an amount they consider fair — somewhere between what the attorney would like to make and the client would like to pay. Yet because the process is so opaque, neither side leaves happy or really trusts the others’ business practices.
Advertising
At the same time, the Association of National Advertisers (ANA), the trade body that represents major brands purchasing advertising and the American Association of Advertising Agencies (4As) routinely go back and forth on matters of trust. The most recent issue relates to the rebates and reimbursements agencies allegedly receive from publishers, but this is only the latest topic in a long-running conversation that pits agencies’ non-transparent business practices against advertisers’ procurement departments. During every contracting process, agencies feel like their teams are squeezed, while advertisers don’t understand what they’re getting for all the money they spend. Eventually, they arrive at a sort of a middle-ground, but neither side is happy.
The Light Bulb Joke
One way to see if this applies to your profession is to run the “light bulb” test on it:
Q: How many lawyers, advertising agencies, or consultants does it take to change a light bulb?
A: How many can you afford?
What’s going on?
In all of these scenarios we see a few commonalities:
- Clients generally trust the practitioner — otherwise they wouldn’t continue to hire them.
- Clients don’t think that the bills they receive from the firm, and the industry generally, are fair.
- The core issue with the bills is transparency. Clients don’t know beforehand what they’re going to get and they don’t know afterwards what they actually paid for.
- Clients feel like their advisors aren’t being honest, but providers feel like if they were honest, the clients would take advantage of the situation and drive profits out of the business.
- These issues are inherent in a business model that sells time, but that business model is profitable for incumbents and risky to shift.
The problem is that profitable industries with low trust are ripe for Disruption. If you want to see how, just take a look at Blockbuster video. Blockbuster generated massive profits for years, mostly on late fees. But customers felt nickel-and-dimed by all those fees, which felt capricious and unfair. One customer went so far as to found Netflix, a company that aligned their business model with how customers wanted to pay for movie rentals. Blockbuster struggled to react, and even when they offered a superior product at a superior price, customer distrust was so strong that they refused to use the service. In 2002, Blockbuster was worth $5 billion. Less than a decade later, it was bought out of bankruptcy by Dish Network for $277 million.
In the age of information, businesses that lack transparency are setting themselves up for disruption.
In my next post, I’ll look at what advice businesses can do to build trust and get ahead of disruptive change.
David Dworin helps professional services firms to grow and scale their businesses. At a time of intense change, he helps them focus on the parts of the business that endure: managing great people, offering valuable services, and building trusted client relationships. You can learn more athttp://www.dworin.com
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