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The Critical Question

When considering value, we measure what we are paying for what we are receiving. But sales culture is ripe with conflicts-of-interest between buyers and sellers, and most people aren't asking the critical question.

From snake oil, to beaver furs, to mutual funds — people have always been selling.

And getting objective opinions from salespeople is often challenging. It doesn't make them bad people or bad products, nor does it mean the system necessitates change. It just demands consumer awareness because traditional sales is rife with commissions, misaligned incentives, and self-dealing.

It's been this way forever because while it may not be perfect, with some reasonable regulation over predatory sales tactics and fraud, businesses work fairly well when they find ways to compensate sellers according to their ability to sell.

And we consumers should be more scrupulous in unpacking conflicts-of-interest and profit-motives. They're everywhere. We want to feel like we are clients whom are well taken care of, but instead we're often made to feel like we are well taken care of...when we're really only being set-up to be sold to.

Sales bonuses are not typically paid on great long-term client relationships, but instead on one-time customer transactions.

I'm not suggesting that every time you buy cereal or fill up your tank with gas, you ponder whether or not you might be getting screwed. Competitive markets for products do a good job of keeping prices reasonable, and life is too short to obsess over peanuts decisions.

But I am suggesting that any time you buy something big enough that it warrants a salesperson (cars, life insurance, home security, timeshares, investment products, etc...) — that you ask them the critical question.

The non-critical question that most of us ask instead, relating to value, is some version of "What am I getting for my money?" or "Why is this a good deal for me?"

What we are trying to discern is...

Why this price? Why isn't it cheaper?

Unfortunately this walks right into the playbook, because it allows salespeople to regurgitate their purported unique value proposition. They're trained to tell us all the great things that buyers get for the relatively low price that they pay. But we get very little useful information from asking this question because the response is pre-scripted. Any well-trained salesperson can articulate value.

Instead, consider gleaning more insight by leading with this question...

Why isn't it more expensive?

Now they must describe not just the extent of their value, but also the limitations. Companies maximize profits, and you should assume that above the current price point, some meaningful number of consumers will stop buying the product (that's why they don't charge higher). You and I, as prospective consumers, want to know why.

This simple change can open a purposeful dialogue that connects product value to the right and wrong customer...rather than forcing you to listen to a rehearsed sales shtick. They assume you're price sensitive, and expect you to ask why something doesn't cost less...but they are not expecting you to ask why something doesn't cost more.

If you want to avoid the shtick, pretend you're price insensitive.

I get bombarded by investment product wholesalers who want me to buy their products for our clients. I take very few of these meetings, but when I do, this is the critical question I always ask them: If it's so great, why isn't it more expensive?

Because if they can't answer that, then it's just a shtick. And I'm not into shticks.



If you're interested, here are other pointy questions I always ask investment wholesalers:

  • Can you describe an investor who should not buy this product?

  • At what price point would this product be so expensive that you'd no longer recommend it?

  • At what price point is this product so cheap that it no longer generates profits for your company?

  • Which of your direct competitors do you admire the most, and why?


My blog posts are informational only and should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in my posts will come to pass. They are not intended to supply tax or legal advice and there is no solicitation to buy or sell securities or engage in a particular investment strategy.

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