what is your value proposition?

We are in the midst of an economic revolution thatis radically changing how business is being

done. Tom Davis, head of Merrill Lynch's InvestmentBanking and Capital Markets Division, who is respon-sible for creating their institutional portal, explains,"There is no single industry that hasn't been radicallytransformed by the Internet revolution, and the trans-formation keeps accelerating. The internet creates anenormous potential for innovation. Technologychanges everything."

This new transformingindustrial revolution is fueledby entrepreneurs, technologyand the internet. Entrepre-neurial thinking and innova-tion has become the most crit-ical skill set for firms to mas-ter in order to be successful.How things have been done inthe past is irrelevant. Thequestion is: "Can I create suchdemanding customers for myvalue that it will be almostimpossible for my competitorsto make an in-road?"

Ability To Adapt Is Key

This is a supercharged competitive environmentwhere clients are better informed, have greater choices,are more enlightened and are far more sophisticated.Clients want to know what they are paying for andwhat they are getting in return. They bypass only-game-in-town suppliers and get turned off by market-ing gimmickry. They are more selective and haveworld-class competitive options. In this new competi-tive business environment, our success depends on ourability to articulate and deliver our unique value propo-sition.

Jack Welch, CEO of General Electric, holds themantel of “America's Most Capable Manager". He isthe father of the corporate reengineering movementwhich has been the catalyst for the extraordinary bullmarket of the past 18 years. He has said, "You have tobe on the cutting edge of change. You simply cannotmaintain status quo because somebody is always com-ing up with another product, consumer tastes change,cost structures change and technological breakthroughsoccur. If you are not fast and adaptable, you are vul-nerable. This is true for every segment of every busi-ness in the world."

Senior Consultant

What Is Your Unique Value Proposition?Stephen C. Winks

As Merrill's Tom Davis observed, "The only last-ing technological advantage a firm can have is buildinga capacity for speed, innovation and adaptability.Indeed, innovation, initiative and speed of decision-making are the keys for execution." Welch realized 20 years ago that whoever best man-aged their cultural, structural and technological issueswould win in the global marketplace. Welch made GEthe epitome of initiative, innovation and adaptability.The technological revolution has come to Wall Street

and will change every aspectof how we do business. Thosepractitioners who will do wellare the entrepreneurialthinkers who understand theyare now in the value-addedbusiness, not the trade execu-tion business. As advancedsystems technology convergeswith Nobel Prize-winninginvestment theory, the finan-cial consultant is empoweredto deliver an unprecedentedlevel of professional invest-

ment counsel and value for their clients.

Value-Added Advice Vs.Trade Execution

In commission brokerage, the change will beprofound. Over the next three years, half of all retailtrades will be over the internet, and the average retailtrade will drop nearly 60%, from $66.04 to $28.07. Atbest, this means the average retail broker will have towork two-and-half times as hard to achieve the sameearnings, and this assumes all his business is done overthe internet. For those brokers who ignore the internet,they will have to work five times as hard to maintainpresent earnings because half of retail trading volumewill be lost to the internet. Over a 5-year timeframe,these brokers will have to work 10 times as hard for thesame earnings.

Some of this shift to the internet can be mitigatedby firms creating internet strategies. This will helpretain some of the trading volume which is otherwiselost to the internet. The undeniable truth is theconsumer will gravitate to quicker, better, cheaper tradeexecution, unless the financial advisor can addtangible, quantifiable value in terms specifically mean-ingful to each client. In order for the commissionbroker to keep their present client base and to grow

The question is:“Can I create such

demanding customersfor my value that it

will be almostimpossible for my

competitors to make anin-road?”

The Voice of the Investment Management Consultant

January 2000, Vol. 3, No. 1

S E N I O R C O N S U L T A N T

2 SENIOR CONSULTANTJ A N U A R Y 2 0 0 0

© 2001 PCT PublishingPh 804-795-1642 Fax 804-795-7703

their business, they will have to assume theinitiative to persuasively articulate the tangible,quantifiable value they deliver to their clients.This is not selling products or executing tradesfor a commission; this is an entirely differentbusiness enterprise that requires one to selltheir professional investment and administra-tive counsel for an on-going fee. The success ofthe commission broker and their firm dependssolely on the level of professional investmentcounsel provided and the discernible valueadded. In essence, financial consultants as wellas their firms must be able to articulate theirunique value propositions.

So, What’s Your Value?

Leo Pusateri, President of PusateriConsulting and Training, coined thenow-often heard phrase, “so, what’syour value?”, has been at the forefrontof helping individuals and some of theworld's largest companies to discoverand deliver their unique value proposi-tion. There are no individuals or indus-tries untouched by this new emergingbusiness environment. Pusateri helpsindividuals and companies to reinventthemselves and to brand their value.He has created the 7-step Value Ladder,a comprehensive process to unlock theunique value proposition within eachindividual and each organization. The uniquevalue proposition, in essence, translates inpractical terms, all the changes that are occur-ring in the financial services industry andmakes it meaningful to each client.

Pusateri contends that you have to knowyour value before you can sell your value. Hebelieves you have to first go through an intro-spective process to create your own emotional“a-ha's.” This process will force you to answercritical questions that will further your abilityto differentiate yourselves. It supports histheory that you have to discover your valuebefore you can deliver it. Then you can alsocreate an "a-ha" for the client as the clientdiscovers who you are and the value you add.You are reinventing yourself and what you doin a totally new business environment whichhandsomely rewards those who can add valuefor their clients.

This is a once-in-a-lifetime transformationof the financial services industry - from tradeexecution to adding value through engagingprofessional investment counsel. Your services,designed to add value, are in stark contrast tothose of your trade execution competitors,where it is not possible to add value. Thus,establishing your unique value proposition isimperative for investment managementconsultants in order to capitalize upon the mostpowerful market position they will ever experi-ence. Consultants are positioned to trulybecome world-class competitors to exponen-tially grow their businesses. For those financialservices professionals and organizations that

would like to compete on the basis of the valuethey add, rather than trade execution, estab-lishing their unique value proposition is essen-tial in order to become a world-classcompetitor. It is a vehicle which will transforman organization or practice by sharpening andhoning their focus.

The Value Ladder

Pusateri’s 7-step Value Ladder establishesthe following seven questions which should beanswered in sequential order to develop one’sunique value proposition.

1. Who are you?2. What do you do?3. Why do you do what you do?4. How do you do what you do?5. Who have you done it for?6. What makes you different?7. Why should I do business with you?

Answering these seven questions will enableyou to discover your value. Pusateri counselsthat today's clients see through everything, soyour unique value proposition must be deliv-ered with confidence, passion and speed. Youcannot equivocate or be hesitant about anyaspect of your delivery. How you present your-self says as much about you as what you say.And what you say must be backed up by whatyou do and what the client actually experi-ences.

There is an ancient proverb that says: "Hewho knows not and knows not that he knowsnot, is a fool; shun him. He who knows not andknows not that he knows not, is ignorant; teach

him. He who knows and knows not thathe knows, is asleep; wake him. But, hewho knows and knows that he knows,is a wise man; follow him." Pusateriwants to help individuals and organiza-tions to become world-class throughdiscovering and creating their uniquevalue proposition. Your confidence andpassion in your services and response,coupled with your clients' feedback,are key determinants in becoming aworld-class competitor.

1. Who Are You?

Most financial advisors andorganizations are most confident in

explaining their background and who they are.The objective with this first question is to artic-ulate your organization/business/ practicebackground and your professional and personalbackground. Here you are thinking about theorganization you are working for or your busi-ness/ practice, and how you will describe it tosomeone.

Your initiative in creating an enterprisethat is differentiating within a large organiza-tion is important. You want to create acompelling background response that isbeyond your name and title; you want to estab-lish differentiating professional credentials.The way you respond to this question will givean immediate impression to someone regardingyour confidence. This response will also set thestage for an emotional connection to things thatyou and your potential clients share incommon, such as civic activities, family,education and special interests. For each client

This is a once-in-a-lifetimetransformation of the

financial servicesindustry − from trade

execution to adding valuethrough engaging

professional investmentcounsel

www.SrConsul tant .comEverything You Need to Add Value


3SENIOR CONSULTANTJ A N U A R Y 2 0 0 0


or prospect feel your passion? Is there any hesi-tancy or equivocation? Are you emotionallyconnecting? Are you looking your client orprospect in the eyes?

Even one of our key entertainmentgurus/college professors has a perspective onthis. Oprah Winfrey recently conducted 10three-hour lectures in the "Dynamics ofLeadership" course at NorthwesternUniversity's Kellogg Graduate School ofManagement. Winfrey observed, “Business isnot just about strategy and management. It'sself-expression that creates value." Shecontinues her observations by saying that lead-ership decisions "come from the core of whoyou are."

Pusateri feels that most financial entrepre-neurs have a greater perspective on answeringthis basic question by completing all sevenquestions. Building on Winfrey's thoughts, theValue Ladder process incorporates an organiza-tion's and an individual's core values. This laterintrospective brings further clarity to all thequestions in the Value Ladder.

situation, you have to assess how much infor-mation is appropriate; experience brings out theintuitive feel for this response.

The strategic implications to explaining"who you are" are profound. How well will youposition yourself with your typical response? Inwhat ways does this response help you beginyour differentiation process? Does thisresponse help set the stage for further dialogue,trust and rapport building? What additionalinformation does your team need to answer thisquestion on a world-class level? Are you reallyconnecting to the marketplace in a meaningfulway?

The starting point is your name, title andfor whom you work. Explaining forwhom/what organization you work is typicallydone by giving organizational history, strategicalliances, relationships and time in existence. Ifappropriate, provide the name of the depart-ment in which you work. Explain the role ofyour department or group within the largerorganization. Provide professional andpersonal background, if appropriate.

Professional considerations are:· Years in the business· Geographic responsibilities· Years with organization· Organizations with which you were

formerly affiliated· Key clients· Number of new clients added last year· Specialized expertise· Professional designations· Professional affiliations· Uniqueness of background

Personal considerations are:· Where you live· Area in which you grew up· Family - spouse, children· Educational background· Hobbies· Recreational or competitive sports you

enjoy· Other current work activities/civic organiza-

tions· Charities or organizations you support· Uniqueness of background

As one prepares to say "who they are," itmust be said with confidence. Does your client

2. What Do You Do?

Answering the question "what do you do"is, in essence, articulating your unique valueproposition. It is a short statement or paragraphthat clearly and succinctly captures the essenceof what differentiates you from your competi-tion. It is unique because of you and becausewhat you do is different from everyone else. Itadds value because it helps clients to achievetheir objectives. And, it is a propositionbecause it is a proposal. It is what you say in 10seconds when someone asks you what you do.It should imply what you do is special and thatyou can help someone do something that isimportant to them. It should generate interest. Itshould give a sense of your expertise as well asopen the door of opportunity for someone tosay, "That's interesting. Tell me more aboutthat."

Your unique value proposition is not acorporate identifier. It is more formal and takesthe message deeper. It incorporates not onlyyour expertise or specialization, but tells your


Why should I do business with you ?

What makes you different ?

Who have you done it for ?

How do you do what you do ?

Why do you do what you do ?

What do you do ?

Who are you ?

Values and Real Value

Differentiation

Client Successes

Process

Business Beliefs

Unique Value Proposition

Background

VALUEVALUE

All portions copyrights (c) 1998, Pusateri Consulting and Training, all rights reserved.

The Value Ladder


4 SENIOR CONSULTANTJ A N U A R Y 2 0 0 0


prospect or client in what areas you excel. Yourunique value proposition is not as short as a tagline (e.g., Nike's “Just Do It,” or Ford's“Quality Is Job No. 1”) and not as long as amission statement.

The challenge in developing your uniquevalue proposition is that it is an introspectiveprocess, requiring deep thought. It is not justtaking a piece of paper and starting to write.Pusateri accomplishes this with a dynamic off-site group setting of individuals who will actu-ally develop their unique value propositions.He explores the "cousins" of your unique valueproposition: tag lines/labels/ slogans, brandstrategies, unique selling propositions, missionstatements, vision statements and value state-ments. Pusateri helps you to explore yourpresent response to the question, "what doyou do?" This helps to establish the clientresponse you desire, focuses on your idealclient and helps to align your value to thatwhich your clients truly value.

Pusateri then brainstorms all thewords that describe the unique value ofyour company, your solutions and you. Youthen work with the 5-10 words that standout to begin creating your unique valueproposition that captures the essence ofwhat you do. You then write it again untilthe message conveys a positive, passionate andconfident feeling, while creating an emotionalconnection through words. As the next fivequestions of the Value Ladder are answered,you will be constantly editing and sharpeningyour unique value proposition.

Through group interaction, you willpresent "who you are" and "what you do."Group participants will challenge each otherand will make you go deep in follow-up ques-tions. Can you explain it to others? Does itsound unique? Do you feel any excitement?Does it make you feel unique? Most impor-tantly, can you deliver it with confidence andwithout hesitation? Does the client or prospectfeel your passion?

3. Why Do You Do What You Do?

The answer to this question is criticalbecause it establishes your organization's busi-ness beliefs which, in turn, drives your businessstrategy. Your organization's beliefs are thephilosophy that supports your organization or

practice. It may be your financial planning orinvestment management consulting philos-ophy; it may be your estate planning, insuranceor tax philosophy.

It is what you feel so strongly about thatpotential clients can readily feel your innerpassion. The focus is on "why" you recommendcertain strategies and approaches to the busi-ness. Business beliefs are not "how" you wouldtreat your clients but are more focused on whyyou sell what you sell. Remember, they arebusiness beliefs, not personal beliefs. Business beliefs are founded on a combinationof factors: where your business is going(market and industry trends), where your busi-ness has been (historical patterns) and what youhave learned as an organization (opinions,

wisdom and experience). Consultants arecompeting on the basis of the value they addand have learned that through technology theyare empowered to deliver an unprecedentedlevel of professional investment counsel andvalue.

Your business beliefs or "why you dowhat you do" must be consistent with the solu-tions/processes you market. Prospects can spotthese inconsistencies immediately. Sometimesan organization's business beliefs are differentfrom those of its practitioners, e.g., sellingproducts or focusing on trade execution vs.offering professional investment counsel. Thatis why you must present a unique choice in themarketplace. It is also why it is important thatyou know and can articulate your unique valueproposition.

Once you have established your businessbeliefs and have found them to be consistentwith where you want to take your business -and/or what you might need to do to changeyour business direction to make it consistent

with your beliefs - you again rewrite yourunique value proposition. You then again deter-mine if your unique value proposition is deliv-ered with confidence. Can the client feel yourpassion? Is there any hesitation or equivocationin its delivery? Are you looking in your client'seyes? Here you are just beginning to see howyour beliefs not only differentiate you butenhance your unique value proposition. Yourbeliefs give it life, make it yours and instillyour passion.

4. How Do You Do What You Do?

The process and methodology you use inadding value for your clients is another keyelement of differentiation. As business is

looking more and more commoditized eachday, your process or "how you do what youdo" is a significant opportunity for differ-entiation. It is here that the insurance agent,financial planner, investment managementconsultant, stock broker and accountantwho all say they do the same thing (i.e.,provide professional investment counsel)significantly differ in what they do andwhat value is, in fact, added.

In the past, the insurance agent hasbeen more adept at addressing estate taxefficiency. The financial planner has

looked at the big picture and tried to determinewhat to sell the client. The accountant worksthe big picture and recommends strategies butnot specific investment recommendations. Thestock broker has traditionally sold specificinvestments in a non-discretionary commissionbrokerage account where it is very difficult toadd value. These competitors are continuing tochange and are redefining their value as well.They all want a greater share of their clients'business. The world-class investment manage-ment consultant continues to look at the bigpicture to construct custom investment portfo-lios which address all the investment valuesimportant for each client to achieve theirpersonal goals and objectives.

Each of these financial services profes-sionals can have an elaborate process throughwhich they professionally arrive at client solu-tions, and each can have a very impressiveunique value proposition. But Pusateri asks: "Isthis process consistent with what the clientreally wants? Does this pose a partial or

Your unique valueproposition is not a

corporate identifier;it is more formal and

takes the messagedeeper



5SENIOR CONSULTANTJ A N U A R Y 2 0 0 0


added value for them. Clients can be describedby market segment such as high net worth indi-viduals, small foundations or corporate treas-urers with responsibility for their 401(k) plans,so no confidences have to be divulged andconfidentiality of your existing relationshipscan be protected.

The strategic implications of the questionof "who have you done it for" allows you tofocus on the client. Who are they and whoshould they be? What are their needs and prior-ities, and how are they changing? What is yourspecialization strategy and is it well-suited toyour existing client base? How will your clientsmeasure your success? Is there a good way toeducate prospects on existing client'ssuccesses?

Pusateri has you identify the specificmarket segments with which you and yourorganization have had success. Then youdescribe the challenges these clients face, thesolutions you provide and the real value youadd in each success. Your unique value propo-sition needs to be personalized for each marketsegment, each client and each prospectiveclient because their priorities will be different.

Thus, understanding your client's andprospect's priorities becomes very important inhow you explain "who have you done it for."Your sense of how their needs and priorities arechanging will help you better articulate thevalue you add and what is important to them.

6. What Makes You Different?

Your response to this question will helpclients understand the depth and breadth ofyour differentiation and will set you apart as

complete solution in anticipation of the client'sreaction as reviewed in Step 2?" Here, thelevel, scope and sophistication of client serviceembodied in the process becomes clear.

For consultants, the issues of income taxefficiency, estate tax efficiency, plan adminis-tration counsel and the breadth of the marketsegments (defined contribution, foundationsand endowments, high net worth, definedbenefit, profit sharing, Taft Hartley, publicfunds, family offices) to be served are definingelements of their unique value proposition.How the consultant structures their investmentprocess using six services (asset study, invest-ment policy, strategic asset allocation, portfolioconstruction/ manager search and selection,performance monitor and tactical asset alloca-tion) or combining investment policy,strategic asset allocation and portfolioconstruction/ manager search andselection into one step or doing every-thing up to the performance monitoras one step - all gives the consultant anopportunity to differentiate himself.For example, emphasizing forms ofownership such as insurance and trustsin portfolio construction would allowincome and estate tax-efficiencyissues to be addressed. Focusing onmanaged accounts would allow one toaggressively manage portfolio coststructure as mandated by ERISA.Focusing on small businesses of middle marketinstitutions would imply specialized expertise.The opportunity for differentiation is endless,creating a rich environment to establish apowerful, persuasive, unique value propositionthat truly captures "who you are."Pusateri again has you reconfigure your valueproposition to reflect your unique approach tohow you add value. When you now give yourunique value proposition, it comes alive. Youare confident and speak with passion becauseyou are the value added. There is absolutely nohesitancy or equivocation in explaining whatyou do.

5. Who Have You Done It For?

Translating what you do in terms mean-ingful for your prospects and clients is bestachieved by sharing your client successes. Notjust who your clients are but how you have

being world-class. You are different than yourcompetitors. You offer different solutions, andyou are individually different.

Pusateri helps you to differentiate yourorganization and improve your ability to articu-late your overall differentiation. You need to beworld-class conversant about your principalcompetitors and their solutions. The ValueLadder process helps you to identify youruniqueness and competitive advantages. It alsoviews your parity and competitive disadvan-tages. This discovery process of what makesyou different from your ideal client's perspec-tive allows you to speak with passion andconfidence.

Why ShouldI Do Business With You?

Here you differentiate yourself andconnect with the client on both anemotional and logical basis.Business first becomes a meeting ofthe hearts and then becomes ameeting of the minds. The meetingof the hearts is characterized byqualitative answers and should givethe client an "a-ha." These valuescan be organizational principles,standards or code of ethics. Ameeting of the minds is character-ized by quantitative answers andgives the client a bigger "a-ha."

Real value is quantifiable and measurable,helps clients achieve their objectives and helpsyou to position your proposal of value. Pusaterihelps you to determine your specific values andthe values of your practice/organization, andaccordingly, helps you to create the final draftof your unique value proposition.

Unique Value Proposition

Once you have your unique value proposi-tion memorized and incorporated in all salespresentations, all proposals, all brochures andmarketing materials; and once you arecommitted to reviewing and improving it witheach planning session, you are well on yourway to becoming a world-class competitor. Youare focused and can speak with confidence andpassion about the value you deliver to yourclients. But more importantly, the same process

How Would YOU Answer TheseValue Ladder Questions?

1. Who are you?2. What do you do?3. Why do you do what you do?4. How do you do what you do?5. Who have you done it for?6. What makes you different?7. Why should I do business with you?



have to work five times as hard to maintaintheir earnings. This is in contrast to investmentmanagement consultants who are giving awaytrade execution but are compensated hand-somely for the advice they offer. In such anenvironment where most investors have yet tobe informed of the value investment manage-ment consultants may add, developing anddelivering your unique value proposition couldbe the single most significant accomplishmentin your career. You will not only have made thetransition to advice but would have becomeworld-class in your delivery. We are indebtedto Leo Pusateri in helping the financial servicesindustry make the difficult transition from tradeexecution to advice and are enriched by hisprocess to create our unique value proposition.Pusateri consults with organizations who arecontinually trying to define their value. Forindividual financial entrepreneurs, he providescoaching and group retreats in his “DiscoveringYour Value” program. For more information,he can be contacted at 716-631-9860 or via e-mail at [email protected].

Editor’s Note

The most brilliant aspect of the ValueLadder is that it covers all the questions a clientwould ask, yet pricing is not part of the ValueLadder. Pusateri reasons that pricing is only anissue for those who don't know their value.Pricing is actually the best part of theconsulting thesis because so much service hasbeen put into one delivery vehicle. In fact, forinstitutions, pricing for investment manage-ment consulting can be cheaper than tradeexecution alone. Though one should have apricing answer . . . and this is the best part . . .the emphasis is on the unique value propositionyou present.

James P. OwenCo-Founder

Stephen C. WinksCo-Founder, Publisher & Editor-in-Chief

Sydney LeBlancConsulting Editor

Mamie Woo McNealProduction Editor

Eddie BryantMarketing Consultant

Advisory BoardJerry Bott

Merrill LynchJohn Brock

Brock-Hazzard, First Union SecuritiesDick Charlton

New England Pension ConsultantsBob Cluck

Canterbury CapitalHarold Evensky

Evensky Brown & KatzJeff Frum

Wells FargoRich Gleason

Salomon Smith BarneyKathleen E. HegenbartSalomon Smith Barney

Brian HunterPrudential Securities

Greg HunterAlex BrownBill Johnson

CapTrustJohn Kelsey

Salomon Smith BarneyKeith Phillips

Morgan Stanley Dean WitterBob Rowe

Morgan Stanley Dean WitterDick Smith

Capstone Investment GroupJim Yanni

Yanni Parnters

Senior Consultant

THE VOICE OF THE INVESTMENTMANAGEMENT CONSULTANT

Senior Consultant1457 Crystal Springs LaneRichmond, Virginia 23231

Ph 804-795-1642 Fax 804-795-7703

www.SrConsultant.com

you went through to create your unique valueproposition also empowers you with a veryformidable world-class client presentation suit-able for institutions or individuals alike.

Though you will be flexible in order of itsdelivery to reflect the circumstances, this pres-entation provides the distinct impression thatyou are confident and passionate about thevalue you bring to the table. How you say“what you do” is as important as what youactually do. Pusateri prepares you physicallyand literally to be a world-class competitor forany prospect in any situation.

And though this beautifully polished pres-entation capability will be much admired byclients and prospects, the real value for allthose who partake in Pusateri's Value Ladderexercise is they begin to better understand whothey are and the value they bring to the table.The organizational dynamics alone are worththe exercise because that is what makes you aworld-class competitor. Every firm and everypractice that has to reinvent themselves as thefinancial services industry moves from tradeexecution to advice, that has to wrestle with thecultural, structural and technological issues ofadvice, will be transformed by Leo Pusateri'swork.

Summary

Clients and financial advisors alike aregreatly confused by the advice revolution. Yet,in this confusion there is opportunity tocompete at a much higher level than waspossible with commission brokerage. Thedifferences in the value one can add throughinvestment management consulting areprofound. Yet, there are a very small number ofprofessionals who are world class in articu-lating the value they add.

Over the next 36 months, commissionbrokers will either lose 80% of their earnings or

Notes

what is your value proposition?

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