If investing were a one-time or short-term need, rather than an ongoing process, and did not need to be specific to each person’s individual situation, then the prevalence of products would not matter. However, financial management firms are being asked the difference between product and process based financial services, and we’re here to deliver some clarity for those interested.
Product Based Services Clarified
A product-based service is one in which a professional has the end product in mind, and a ready-made entity to be sold, before knowing anything about the client. Most goods and services fall into this category. A grocery store, for example, offers a product-based service. Product-based services are provided to the customer with little input from the customer on what he or she is getting. The provider sells the same thing to different customers.
Well before the printing press, the ancient Egyptians used papyrus to produce sales messages. Even when the vast majority of people were illiterate and lived in poverty, producers used “billboards” with images to advertise their product offerings. Today, mankind’s propensity to be pitched-to is arguably best exemplified by the staggering (and growing) infomercial industry, which enjoys an estimated $91 billion a year in sales.
Process Services Explained
A process-based service, on the other hand, is a service for which the professional needs to know a lot about the client before offering guidance. Moreover, the service is, by definition, an active part of the end-result. A healthy relationship between a doctor (think G.P., not surgeon) and a patient is an example of a process-based service. A good doctor will be there every step of the way to help the patient get exactly what he or she needs to make the right decisions. That being said, the doctor cannot offer a ready-made entity to solve all the patient’s problems. A doctor can provide expertise and tell patients how to preserve their health according to best practices. However, the patients will ultimately determine whether they take care of their own bodies. The unique circumstances of each patient will determine the prognoses. This is process-based service in a nutshell.
Unlike product-based services, the end result for process-based services does not even exist until the service provider and the client develop it together. Indeed, there may not even be an “end-result” in the traditional sense since the process is ongoing, addressing the client’s needs as they arise over time.
Process-based services tend to address long-standing issues rather than one-time fixes. Other process-based service providers include relationship counselors, personal trainers, life coaches and mentors. A process-focused financial advisor cannot answer questions relevant to preposterous investments because he or she would not offer a quick fix to the problem; they’d opt for longer-termed processes.
Something To Ponder
The financial management firm’s advisor would, instead, take a step back and provide the client with a framework within which the two of them can together answer the question of how to meet the client’s ultimate goals. Only then should the client rely on the advisor to implement their collective vision, and engage in preemptive investment decisions based off the gregarious needs of our growing financial lives.