I just finished reading a financial publication from the fall of 2008. The articles were absolutely worthless. One article said that REITS looked good (they are down 50-60% as I write this). Another article opened with a statement “mutual fund managers are cautiously optimistic about value funds.” Is that another way of saying “We are optimistic but if you lose money, we told you we were cautious.” Another article talked about how you need to educate your clients during bear markets and why this is such a good time to buy (the Dow was at 11,000, now 7300 2-24-09). I like to read old publications because you realize how valueless opinions are and how supposed experts know nothing more than lay people.

If you have been espousing your opinions and making forecasts for clients, you have no value because you have a 50% chance of being wrong. Forecasts and opinions are equally wrong by the brightest PhDs so please keep your opinions to yourself. If you’ve been telling your clients this is a great time to buy, you don’t know that. The Dow could go to 3000 or stay flat for 10 years. Sorry to tell you that those forecasts and opinions you have are worthless and potentially quite detrimental, but its not personal–ALL opinions and forecasts are worthless.

The other financial advisor value proposition often stated is helping clients stay logical and not get emotional about their money. If I were your client and I had just lost 50% of my portfolio, how much would I pay you for that hypothetical value of helping me stay logical or stick to my plan? I would have to say this assistance you provided had no value to me.

So before you go to work tomorrow or pursue any additional financial advisor marketing tactics, ask yourself what substantial value you can be–not that same old diatribe you’ve been telling prospects and clients for years. How can you actually deliver something that has objective, substantial financial advisor value?

Here are some possibilities:

1. Actually make people money in the market  You won’t do that in the way you have been taught. Please read “How to Make Money in Stocks” by William O’Neil or “Beating the Dow” by O’Higgins to understand how money is made.  Stop using funds and the other packaged crap that other financial advisors use.  These packaged products are generally good for the manufacturer, good for the distributor (the BD), pay you good commissions and can be junk for the client.

2. Stop blindly listening to what you have been told like “buy and hold”, “you can’t time the market”, “diversify.” Have these “rules” helped your clients get rich or helped you add financial advisor value?  Start thinking for yourself.  Start reading voraciously.  What really seems to work and not work.  Develop your OWN philosophy and point of view and stop following the crowd. IN addition to the books above, read “What Works on Wall Street” by O’Shaugnessey.

3. To add to point 2, have an investing system for your clients like top producers do.  For example, buy low and sell high.  That means you need metrics to determine what is “low” and “high.” Or have a momentum system to buy or sell what is trending.  But you must have a system or methodology as you cannot blow with the wind and sell what the next wholesaler recommends. I successfully use a very simple but objective system as explained in “Beating the Dow” which outperforms most mutual fund managers.

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Branding is oft spoken about because it is important to larger organizations. Bank of America needs to have good branding. Cisco needs to have good branding. John A. Smith financial advisor or Ben Proctor, Insurance Agent, doesn’t need to have good branding. What John A. Smith and Ben Proctor need are an awesomely successful and productive lead generation/direct response system so that these professionals talking to plenty of prospects and get plenty of new clients. If you already have 10% of the available clients in your town, then you need to turn your attention to your branding and building an image. However, my bet is you don’t even have one percent of the financial services business in your town. Therefore focus on getting clients, not getting an image.

The problem with branding is you cannot control the result, it is a long-term process and the cause and effect is hard to measure. You may not see a payoff for years. Direct response marketing on the other hand will provide results this week. If you mail 1000 postcards and get 12 responses, you know what you have. You can calculate the ROI, your can make adjustments and tweak your mailings to success. Would you rather have a new client in 10 days or potentially, maybe many new clients in two years? My guess is you’re interested in more immediate results and branding is not the key to get there. That’s not to say branding is bad, it just costs money and takes time thereby taking resources away from the far more important direct response marketing. Money put into any of the following will produce far faster and far more identifiable results:

Direct mail
Seminars
Internet marketing (pay per click marketing)
Newspaper advertising
Radio advertising
TV advertising

All of the above must be used in a way that is not oriented toward building your image or building your name but rather getting people to respond i.e. pick up the phone, send back a card, attend a seminar or do something so that they take a step toward you to become your next client. If you do your direct response marketing actively and effectively, then in a couple years we can talk about how to do branding well.

For more on Financial Advisor Marketing.

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It’s time for a wake up call or your business will be swallowed by entities with more money than you who know how to use technology to take your business.  If you manage money or sell investments, there are already many sophisticated tools on the Web that can replace your advice.    If you sell insurance, anyone can get term insurance on the web in about 10 minutes and they do not need you.

Your hands are especially tied working for a large firm because you cannot use the Internet as a powerful tool to fuel your business.  You cannot have a web site, you likely cannot have a blog, you cannot build a personal reputation.  You are a sitting duck.

Sorry if you are affronted, but I want to help you protect your business and that means facing the truth.

If you think, “Well I’ll just offer term insurance on the web too,” realize that there are thousands of agents on the web who already do this.  There’s no reason to come to your site as this product has been made into a commodity.  If you think, “I will offer stock advice on my site,” join the other thousands of sites that can do this better than you.  In the long run, the Internet is not your friend.

The solution to this is to make sure you are NOT doing the same thing as everyone else.  You can differentiate any commodity and carve out a protected niche.

This may require that you learn something new.  For example, I cannot find advice on the web about where to find high yielding, yet safe preferred stocks.  That’s a specialty. To become such an expert, means you need an education in that arena.  How many sites are called “Term Insurance for Physicians?”  That can be made into a specialty and requires that you really understand the needs of physicians and how they differ form others.

The public is getting smarter all the time.  Ten years ago you could exist as a financial planning generalist.  As people get smarter they will realize they can fill out some forms on the web and get the same financial plan you handed them.  As they get more sophisticated , so must you.  Financial advisors must be one step ahead of the prospect, or you’ve got nothing of value to offer.

Please do not ignore the threat of commoditization of financial planning.  It’s happening slowly.  Schwab and Fidelity are offering your clients planning services.  These efforts will expand.  Insurance companies are turning their captive agents into financial planners.   And as mentioned, web sites already provide financial planning to your clients.

The good news is that the process of the public learning how to be their own planner is a slow one.  There’s also a segment of the public, the affluent, that has more complex problems that they will always need a professional (which requires that you understand and have solutions for those problems).  Additionally, seniors have not adopted the web as quickly and remain a viable market for personal service and like the attention of a human.  Last, there are certain personality types (a ripe area for you to study) that will always be more responsive to getting assistance than doing it themselves.  Targeting these people is wise.

What should you do.

Pick a specialty.  Some arena of your work that fascinates you or you see as a lucrative growing area.  Become an expert.  You do this by studying everything you can find and learning from any experts that already exist.  You may need to subscribe to new publications and attend specific seminars or workshops.  It’s an investment of your time and money. (The key to success in any business in this century is being a self-teacher). You will also need a marketing system to communicate your expertise to the target market that value’s it.  The benefit to you will be a business that has staying power.

Some examples of specialization:

• Specialist in preferred stock
• Specialist in stocks of (name an industry)
• Specialist in working with (name a profession or segment of the population)
• Specialist in tax reduction
• Stock options specialist
• 401k specialist
• Specialist in insuring sub-standard cases

Pick a niche and protect yourself. Read more on niche marketing at Brokerville.

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1) The caliber of the prospects you speak to
2) The variety of prospects you talk with
3) How good of a sales presentation you provide

Let’s take these in order over three posts. Today, let’s cover your insurance prospecting method–how you locate quality insurance prospects.

Your way of prospecting will be the main determinant of the number of prospects who purchase.

Make certain that your insurance marketing process only produces appointments with interested and qualified insurance leads. Here’s the contrast of two prospecting approaches. The initial approach produces results while the next alternative saps your spirit.

Cold-calling, a conventional way of insurance marketing, produces insurance prospects that must be persuaded. You could be “twisting his arm” to some degree to get the appointment. Is it any surprise that 30% of the time, your insurance lead is not present when he had scheduled to meet or they are not interested?

What would occur if rather, you took out an advertisement offering a free pamphlet about a specific topic in which you had expertise, such as annuities as a source of retirement income? Those people that respond to the advertisement for that pamphlet would be self-motivated annuity leads and have an interest in your topic. And isn’t this the sort of prospect you want from your insurance prospecting, a prospect that takes action?

A young lady who a short time ago entered the occupations of real estate asked me about the best way to gain clients. I had her create a pamphlet, “Ten Mistakes to Avoid When you Sell Your Million Dollar Home.” We ran the ad within the food section of the Wednesday newspaper, the day that has all of the food discount promotions. The ad was $250. The agent received 62 orders for her pamphlet.

If she had cold called, how long would it have taken her to identify 62 qualified prospects? This prospecting system we have just described allows you to make much better use of your time because your initial call is a warm call to her receptive motivated prospect.

Now you can see the difference and how you’re insurance marketing method determines the caliber of prospects you attract. Therefore, to make your life easy, use the model of offering an item to your targeted prospect (e.g. by age, revenue, profession, zip code, phase of life,etc) and you ONLY contact those individuals who want your package. The supplied item can be:

a) a pamphlet or totally free report
2) an offer to attend a seminar presentation
3) a free quotation
4) a free analysis

Then, once you contact the insurance prospect, you get in touch with them simply because they requested something of you. You are not asking for their business and you are not making the initial approach.  You are getting in touch with them to figure out how you can serve them. This places you in the position of a professional, the control position, and starts the relationship on the proper foot with an appropriate and valuable prospect.

Now that you have an insight into insurance prospecting that is effective,  I’ll talk about how to acquire high numbers of inquiries from these high quality prospects in the next post.

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–their product is commoditized with every other similar financial product (e.g there’s nothing different about one mutual fund vs the other)
–as a result of commoditization, they are constantly fighting for shelf space vs their competitors
–they are continuously pushing on the weakest link in their distribution–the broker’s inability to market himself. So the typical financial services marketing activities conducted by product firms look like:

1. taking brokers to lunch and shmoozing them because they know their product is the same as others.  Thus, they compete on a beauty queen basis, hoping to look better than their competitors
2. coming up with all types of sales tools–scripts,storyboards and illustration software (the more colors, the
better)
3. offering trips and incentives when regulations allow, again attempting to look better than their competitors

But what if the financial product firms, say the mutual fund company or the insurance company, decided that
focusing on the sale of their product was not the best way to maximize sales.  What if they actually employed financial services MARKETING and did not confuse marketing with sales?  Their tactics would then look different.

The first questions would be “what is most important to the brokers who distribute our product?”  And the quickly realized answer is that brokers certainly do not need another me-too product.  What the broker needs is more clients.

So smart financial services marketing is helping the brokers, the distribution channel, to fill their pipeline.
Notice, for example, that Intel sells more chips not by attempting to sell you, the end user, their chips, but by
having you request their product from their distributors (is it Intel inside?).  The Zen paradox of so many
goals is that the best results (in this case, maximizing financial product sales) are often achieved when you
do not focus on the end result you desire.  In this case, focusing on the distributors, the activities that help
brokers would be:

1. teaching them how to get more referrals, use direct mail more effectively, write better copy for ads, give more effective seminars.  Teaching brokers how to get clients must be devoid of the product pitch. As hard as it may be for the insurance company NOT to hand out slides to the seminar “Why Annuities are the Best Source for Retirement Income,” the insurance company will fair better if it teaches the broker how to get better attendance at his seminar.
2. this product-less education on how to be more successful can be delivered via webinars, maybe a weekly
e-newsletter “referral tips” or  in-person classes by given their wholesalers.

Financial services marketing can result in a lot more product sales when it is actually about marketing rather than products or sales pitches.  The brokers and agents will bring more of their business to those firms which most effectively help them with financial services marketing and gaining new clients.

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The Financial Planning Mantra

A decade or two ago, those who sold financial products and services realized that consumers did not want to be sold stuff. Around the same time, the Internet became a significant competitor to stockbrokers and insurance agents by offering $10 stock trades and term life insurance at rock bottom prices.  So the stockbrokers and insurance agents became “financial planning professionals” as a way to reposition the value they could deliver to the client. The new mantra was to “do financial planning” and in that manner, gather assets and make more sales.  The intent of these financial plans was selling product, but the financial planning approach was the soft sell solution to paint the sales person as a professional and not as a sales person.  In fact, Ameriprise has adopted this branding as their unique selling proposition: “we have more certified financial planning professionals than any other firm.”  In fact, these financial planning professionals continue to sell Ameriprise products and serve as conduits for product distribution.

However, the purpose of this article is not to address whether all of this planning is merely window dressing and question its value, it’s to suggest that there is even a “next level” of positioning that will assist the financial planning professional in their sales efforts.

In the current paradigm, the sale of the financial plan has replaced the sale of the mutual fund or the insurance policy.  But consumers don’t want a plan either.  A plan is abstract, a body of recommendations.  For the consumer, it’s not clear that this advice for a so-called financial planning professional will have any value.  In fact, there is evidence that it will not as studies show that those potential clients behind the baby-boomers don’t think they need a financial advisor.  I had a financial planning professional admit to me last week: “over the last 10 years, my clients have earned exactly zero working with me.” What consumers want is not the plan but the potential benefits of the plan: an early retirement, more ways to financial pamper the grandchildren, the ability to take two nice trips each year, etc.  If you as the financial planning professional sell those payoffs, then you will find more consumers want the plan.  In fact, don’t even use the term “financial plan” when meeting with prospects.

Rather, you want to communicate that you are a “dream weaver.”  If you say you are a financial planner, that connotes someone who offers an activity but does not necessarily produce a result. A dream weaver makes dreams come true.  Your conversation with a prospect needs to focus on what they want i.e. What would you like your retirement to look like Mr. and Mrs. Smith? Of course, this starting question is to be followed with several other questions about how they want to spend each day, where they want to travel, how often do they want to see family, etc.   Once you know what they want, you make them an offer:

“Mr. and Mrs Smith, would it be worth $2,000 (or whatever you charge for a plan) to have solutions to how you will:
a) retire before your 65th birthday
b) have 2 trips a year as you desire
c) be able to help the grand kids with their college education?

(YES, they blurt out).

If so, I would like to study your situation, put together recommendations and specific actions on how to have what you want and meet again next Tuesday?

Instead of selling a plan, you are now a more highly perceived financial planning professional selling prospects their financial dreams come true.

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Cold calling is the biggest waste of time.  I’m not saying that you won’t get clients when insurance cold calling or being a cold calling financial advisor, I am simply saying that it is the worst possible way to use your time.  It is highly inefficient and basically, diminishes the value of your time to something like $10 an hour.  Why work as an insurance agent or financial advisor when you could more easily be a gas station attendant? at the same rate of pay?

The reason that cold calling is simply stupid is as follows:

1. Anyone with any money has placed themselves on the do-not-call list.  They don’t want cold calls from insurance agents, brokers or financial advisors.  So your cold calling will reach lots of poor people. That may be fine if you sell products to poor people such a final expense life insurance, debt collection services or some other service or product suited to people with little money.  However, the majority of cold calling insurance agents or cold calling financial advisors have interest in reaching prospects with money, the more the better.

2. Cold calling substitutes marketing for the work of a “sales professional.”  Firms that don’t want to invest money on marketing will instead ask their insurance agents and financial advisors to cold call.  In other words, the firm has the following policy: “Rather than invest money on marketing, we will abuse our insurance agents and financial advisors to do grunt work because we don’t really view them as sales professionals anyway.  We will have lots of insurance cold calling and  cold calling by financial advisors to gain clients and save our money.”

Financial services marketing is what gets clients to call you. It’s what your firm or you have been unwilling to do. We have many other blog posts on the proper use of direct mail, seminars, use of telemarketers and other financial services marketing that insurance agents and financial agents can do to gain clients.  But to substitute your time for marketing is inefficient and foolish.

3. Cold calling, if done at all, should be done by a telemarketer.  Why are you doing the work of a telemarketer?  Because you don’t have any money?  You will NEVER have any money if you waste your time cold calling.  If you allow some firm to tell you how to grow a business, realize that what they tell you is for THEIR benefit.  They are happy to ride you as hard as possible and then toss you away after a year.  They recruited you and left out one very important part of gaining success:  You must invest in your business.  They unfortunately misled you to believe that if you work hard (and cold call), then you could be successful. NO WAY.

I recently met with a very articulate guy who spent 18 months working for a large insurance company.  He had done very well his first year.  explaining why he left “I had no one to sell to after I contacted and sold all of my family and friends.”  This very large insurance company taught him to insurance cold call but when he exhausted his list, he knew nothing about real marketing or client acquisition.

Look at any other business.  Do they cold call or do they invest in their business?  Does Coke invest money on TV ads?  Does the Ford dealership invest money in newspaper ads?  Does the laundry invest money in direct mail coupons?  The reason these firms invest in marketing is because that is the efficient way to gain clients/customers and build a business.

If you want to grow a successful business, you will need to invest in it.  If you are unwilling to invest or unable to borrow funds (like most businesses do to grow), then get a job with a salary and get out of the insurance or financial sales business.

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Your first boss told you that insurance prospecting is the life blood of your business.  We say don’t do it. Insurance prospecting is the activity of a sales laborer and not an insurance sales professional.  As an insurance sales professional, your time is far too valuable for this administrative, clerical activity.

Know that insurance prospecting is the boring activity of separating the insurance prospects (those people with an interest and with money) from suspects, e.g. names on a list or often called insurance leads.  Imagine you had a list of all residents in Beverly Hills zip code 90210; you can reasonably assume that most of these people have money.  However, most are not interested in your product or service.  How do you locate the few that are viable insurance prospects?  You let a sales laborer do the insurance prospecting.

Here are four scenarios:

1. You delegate insurance prospecting to an outside firm that will design and print a mailer for you.  That company and the post office employees become your sales laborers to deliver your thousands of pieces of insurance direct mail. The few recipients that respond ( say 100 people) are “insurance prospects” and these are the individuals you should speak to now that the insurance prospecting has been done.

2.  You hire a telemarketer or telemarketing firm to call those Beverly Hill residents with your offer (might be an invitation to a workshop, offer for a white paper, etc).  You only talk to the people who express interest, the insurance prospects.

3.  You place an ad in the Beverly Hills section of the LA Times offering your report “The Six Things Agents Never Tell you About Insurance.”  You talk to the 50 individuals that order your report.  The newspaper becomes your sales laborer to locate insurance prospects.

4. You hire an insurance lead generation company to run ads for you on the Internet and find insurance prospects that meet your criteria. You pay the insurance lead provider per Internet lead.

All of these tactics cost money.  They are all an investment. If you prefer not to invest in your insurance agency, then find a position as an employee working for an insurance company or another insurance agent, as clearly you’re not cut out to own a business.  You can be a sales laborer for someone else and do their insurance prospecting and let them make most of the money.

Sure, insurance prospecting is the lifeblood of any insurance practice but you, the sales professional, shouldn’t be doing it.

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Let’s take the following example of selling annuities.  When I ask insurance agents why prospects resist buying annuities,  I am told, “they don’t want to lock their money up.”   HUH?  Every annuity I have ever seen is perfectly liquid–the policy owner can cash it in at any time.  There is no locking the money up.  When I make this statement, the agents then tell me that the annuity funds are locked up by the surrender charge.  “No,” I say, “the money is perfectly liquid” and if the prospect thinks it’s locked up, that idea got into their mind only one way–you put it there.  Because YOU view the surrender charge as locking up the prospect’s money, that’s what you communicate and you lose the sale.

These two issues are distinct:

1. having perfectly liquidity (as every annuity does, can be cashed in at any time)
2. the owner paying for that liquidity feature, let’s call it an “impatience penalty”

So we see that the money is NOT locked up, its just an issue of the prospect being sufficiently patient to take advantage of what annuities offer.  In fact, I sell annuities from a different aspect.

Once I present the benefits of the annuity, I tell the prospect “but this is not for you unless you are a patient investor because only patient investors can get these benefits.”

Prospect: I’m patient, really, this is for me (interesting how people want what is being taken away from them)
Me: You better be because it costs you if you’re not.  Look what happens (as I show them the schedule of impatience penalties).  If you’re not patient and you want to take your money out in the first year, it costs you 6% of your balance, so this is not for you unless you’re patient.”
Prospect: No problem, once I make a decision, I stick with it.

Now, the prospect is trying to convince me his is patient and won’t incur the “impatience penalty.”  Of course, because you’ve been selling financial products from your point of view, you’ve been calling this a surrender charge because that’s what the insurance company told you to call it (you’ve been brainwashed to think like the financial products tell you to think).  You tell me which phrase has more meaning to the prospect: “surrender charge” or “impatience penalty.”  And which would you rather do–convince prospects as you have been that the surrender charge is no big deal as you try to twist their arm to buy OR have the prospect convince you that they are indeed patient enough for your financial product?

It takes some hard thought in a quiet place to determine how your prospects view the world and how you can best sell financial products and services to them.  I can assure that without making this effort, you will continue to lose most financial sales opportunities because prospects don’t share your point of view.

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You see, the knowledge of what you should do does not change your behavior. So the idea that educating your clients or prospect has value is ludicrous.  A recent study of employees who received education on contributing to their 401k because the employer’s match was free money produced no change in behavior.  The researchers concluded: The big takeaway here is that education and financial incentives appear to be ineffective ways to change people’s behavior.

Here’s the good news.  You’ve based your career on a struggle of helping people to do what they should do.  That’s a struggle—and now you can give it up.  It won’t help and it does not matter.  Now you can turn to what matters.  Rather than educating financial advisor clients and appealing to their logic to do what’s right, appeal to their emotions.  If you do that effectively, they will do anything you want.

Example:
You: Mr. Prospect, if you purchase these tax free bonds, you will save $20,000 a year in taxes.

Prospect: I’ll think about it

You:  But you’re just throwing the money down the drain!

Prospect: I know you’re right, I’ll get back to you.

You: (realizing that the LOGIC of saving taxes will not change his behavior) If you had another $20,000 each year, what would you do with it?

Prospect:  I really am comfortable and would probably just leave it in my savings.

You: Maybe you could use it for the benefit or enjoyment for your family. What about your grandchildren?

Prospect: I know! I would take the grandkids on that Disney Cruise!

You:  Wow! Can you imagine 50 years from now, when they sit with their own grandchildren at Christmas and show them  pictures of the Disney Cruise with their Grandpa?  What kind of memory do you think that will be?

Prospect:  How do we get those bonds?
You now know the difference between educating, which has no value, and selling.

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