What is advice really worth?


There’s a story that Henry Ford was having problems with a generator in one of his plants so he hired General Electric (GE) to fix the problem.

The engineer from GE climbed up on the generator and made a chalk mark and told Ford’s people to replace sixteen windings from the field coil.

The job took 5 minutes.

Ford was thrilled until he got an invoice from GE for $10,000.

He balked at the figure and asked for an itemised bill.

It was provided as follows: 

  • Making chalk mark on generator $1
  • Knowing where to make mark $9,999

Ford paid the bill.

I don’t know if this story is true or not but it is a wonderful analogy for the value of professional advice.

Perhaps it is summed up in the following saying; price is what you pay, value is what you get.

Ford was able to get his plant running again and that would have made him a lot more money than $10,000!

So the advice was cheap.

What do Australians think financial advice is worth?

ING published some research in January 2016 which concluded that Gen X and Y believe that fees for comprehensive, personal face-to-face financial advice should range from free to $250.

Obviously, many Australians don’t put any significant value on the advice provided by financial advisors.

The financial advice industry only has themselves to blame for this.

There have been too many horror stories about dodgy financial advisors ripping off their clients and the industry (including the banks) has been very slow to clean up its act. In fact, the banks are still resisting cleaning up their act.

People just don’t trust financial advisors so any advice they give is viewed as unreliable (because of their conflicts and self-interest) and therefore valueless.

Fair enough!

Is information a perfect substitute for personal advice?


20 years ago, if you wanted to find out how to invest in the share market you would have to go and see a financial planner or stockbroker because they were the gatekeeper of this information.

Today, everything is a Google search away.

There’s a plethora of information available – more than enough to help you develop your own financial plan.

However, information is not a perfect substitute for personalised advice.

Yes, you need information and knowledge to give advice but there are two more important components that are required; being experience and skill.


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