What the aged care industry can learn from financial planners
On the face of it, the aged care and financial planning sectors are worlds apart. One is undergoing deregulation while the other is fending off the legislators with a big stick in the form of a Royal Commission.
While aged care providers are busy working out how to appeal directly to a consumer market, financial planners are busy working out how they can remain externally focused while dealing with the increasing compliance and administration burden facing their industry.
But if we drill a bit deeper, there are more similarities than you might think.
Both sectors have a strong focus on helping ageing Australians. Both are adept at having what you might call the ‘difficult conversations’. Both understand the impact that dementia can have on a person’s future.
Both have to deal with death – and the impact that has on a family (financially and emotionally).
While planners are in the business of helping you make sure you don’t run out of money before you die; aged care providers are in the business of giving you a comfortable place to die.
Both have a duty of care to their customers.
A few years ago, ‘best interests duty’ was introduced to the financial planning sector, requiring advisers providing personal advice to retail clients to act in the best interests of their clients.
At the time I remember thinking, ‘wow, do we really need to legislate that?’ and while there were arguments for and against such a heavy-handed approach, enshrining the duty in the Corps Act has certainly focused the attention squarely on the customer.
Regardless of what you think about best interests duty, that’s a good thing. Let’s not forget that it’s the customer who ultimately determines whether we remain in business.
The importance of your CVP
Over the years, as the financial planning industry has matured from a sales-based to a service-based industry, advisers have had to develop strong customer value propositions that clearly articulate the value of the service they are providing – and importantly, why that service is worth paying for.
Not all of them have done it well, but CoreData’s research suggests those that have are demonstrably better off in terms of: client satisfaction; referral-based growth and profitability.
So why is this relevant for aged care?
Recent statistics from Australian Institute for Health and Welfare indicate that WA is set to experience substantial growth in luxury residential aged care offerings in the next five years.
The number of applications made by age care providers nationally to price above the $550,000 cap on refundable accommodation deposits (RADs) increased by 74.7% in the year to June 2017.
Interestingly, since the implementation of the cap on RADs, WA has had the third highest number of rooms approved to charge above the cap of any state at 1,365. While NSW (10,835 rooms) and Victoria (5,743 rooms), the two states leading the charge for luxury accommodation, have experienced phenomenal house price growth during the period, the experience in WA has been quite the opposite*.
If providers are going to successfully market their luxury residential facilities to a consumer market, they need to have a clear value proposition and they need to understand the appetite for decision makers (who are not necessarily the resident themselves, and in many cases the eldest daughter in the family) to pay a premium.
They need to understand which areas can sustain multiple luxury offers – after all, it’s a competitive marketplace – and the impact of price sensitivity on the viability of incorporating such offers in their corporate strategy.
If anyone knows about price sensitivity, it’s financial planners. CoreData’s annual mystery shopping of Australian financial planners suggests fees are a massive barrier to purchase when it comes to making a decision about whether or not to engage a planner – but ultimately this leads to a conversation about price vs. value.
Price is what your customer pays, value is the benefits they perceive they get. The higher the perceived benefit, the higher the customer value and the greater the likelihood that customers will choose that product or service.
Market research techniques like conjoint analysis and discrete choice analysis can help determine how people value different attributes (features, functions and benefits) of what’s on offer. In other words, we can quantify the perceived benefits and trade-offs against price that customers are willing to make.
Just as the articulation of value is critical for the financial planning sectors, aged care providers that are moving into the luxury aged care space must understand that getting approval to price above the cap on RADs is only the first hurdle.
Your approved application to charge a premium for a room in a luxury aged care facility is worth little more than the paper it’s written on if your customer is not willing to pay for it.
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