There's a store in my neighborhood with a big sign above the front entrance that reads "Home Improvement." Many guests enter. Very few buy anything. Almost no one returns after his or her first visit. No one refers anyone else to visit either. You may be thinking yourself, “that store will not be in business very long.” You're right. It won't be in business long at all. In fact, the owners are struggling to stay open.
What Do You Mean?
You see, the sign tells the public that if they have a home improvement need this is the place to come. "Home improvement" means different things to different people. Generally speaking though it leads a passerby to believe they might find a strategy, product, or service to tackle projects to improve their living space. However, at this specific store visitors routinely find the experience unsatisfactory. Therefore, most don't buy anything, and most don't return, and no one recommends the store to others.
Limited Options
What I did not tell you about the store is what you will see when you walk in. On the right-hand wall there are hammers. On the left-hand wall there are more hammers. On the back wall there are hammers. Every aisle is filled with a variety of hammers. They have all of the hammers you could imagine, and even ones you never knew existed.
The clerk who greets you with a smile is friendly and courteous. He asks if you are looking for anything in particular. Some of the sales clerks are even trained to ask you about the project you're working on. “What is it that you're trying to accomplish?”, they may ask. They may do a little fact-finding to learn more about the home-improvement projects that you have in mind, and genuinely seem to care about you.
One Solution Can't Fix Everything for Everyone
However, the answer to everyone's unique home improvement project problem that walks through the store’s door is a hammer. If you are re-tiling a bathroom floor, they have a hammer for you. If you're installing new gutters and downspouts on your house, they also recommend a hammer and nothing else. When you go to the store with the intention of purchasing a new sink for your bathroom remodel, they try to sell you a hammer.
This is why so few buy anything from the store, no one returns, and the store must spend hundreds of thousands of dollars on advertising and marketing to get new people to check them out. They are hoping that enough people walk to the store, either needing, or able to be convinced that they need, a hammer. When all you are comfortable explaining and selling is a hammer, you're probably going to recommend a hammer.
The people who have visited and leave upset are probably upset because they felt betrayed. They thought they were walking into a home improvement store. After all, that is what the sign says. Only to find out that the store only sold hammers. Perhaps nobody would have been upset if the store had advertised itself as the Hammer Store. “We have all kinds of hammers, and we specialize in hammers,” they might proclaim. “If you have a job that requires a hammer, we're probably best equipped to provide you with guidance and selection to make the best hammer selection for your specific job.” No one would be offended if they advertised themselves as the hammer store with hammer experts.
Why This Matters to Financial Professionals
Unfortunately, this home improvement store in my neighborhood resembles a large swath of our financial services industry. Many insurance agents, registered reps, and yes, even investment advisors with a fiduciary duty to their clients, recommend the same thing over and over to every person they meet.
When you're comfortable explaining a particular life insurance policy, or a specific annuity, or a specific mutual fund or investment portfolio, many financial industry professionals choose to promote it to everyone they meet. Personally, I think it is wrong, and I think there's a better way.
Perhaps this is the reason that the Department of Labor, and proponents of the DOL’s Fiduciary Rule, felt necessary to take action. Whether you agree with their actions, or you do not agree with their actions, there are some financial professionals who sell everyone they meet a hammer (often a very expensive hammer that pays them more) regardless of whether the customer needs it or not.
Stand Out
You will stand out in a crowded room right now if you choose to behave and act differently. Choose to take a consultative approach and implement a comprehensive consistent planning process. You may start your process with an incredibly in-depth discovery meeting. You learn everything you can about the prospect, their retirement resources, their goals and concerns, and how everything will work together.
Granted, this is a lot of information to gather and organize. If your goal is to sell a hammer to everyone, this step may seem to be a complete waste of time. However, if your objective is to better the lives of your clients, there’s no other way to go about it.
Focus on Your Clients
Only recommend action where it will benefit the client. If you like annuities with income benefits, but your prospect doesn’t need income, should you sell them an income rider on a variable or fixed indexed annuity? Probably not. On the other hand, if you never took time to conduct a full analysis of their retirement resources, including social security and pension, and never considered their future projected income requirements, selling them a hammer... I mean... an income annuity, might be the best option.
After the prospect has determined that they want to take action and they want your assistance, only offer the products that will maximize their benefits using their retirement resources. It is their money after all! I believe it is unacceptable to recommend products that benefit the company you represent (FMO, Insurance Carrier, Broker Dealer, etc), or yourself over something else that provide more economic benefit to your prospect. An advisor once tried to convince me otherwise by telling me that a client was difficult to work with, and therefore he should get paid more (and the client benefit less) because of it. I guess I’d recommend firing the client, and finding a better fit client for your organization.
Variety Creates Returning Customers
There are thousands of products to choose from. Whether it is for income, accumulation, preservation, or wealth transfer, utilize technology to help you eliminate the products that provide the least benefit for your prospects, and then carefully consider all relevant factors of the remaining products before making recommendations. If you’re not sure what all of the relevant factors are seek guidance from a trusted source of experts. Determine which is the best fit to help execute your client’s actions to fill the cracks in their plan and maximize their benefits using their retirement resources.
The path to creating raving fans, and referral business begins with a clearly defined consistent process that will help guide your clients to take ownership of their current state, make a decision to improve, and take necessary action to achieve the successful outcome they desire.
Start with the Problem
Rather than focusing on how you can sell a product that you want to sell, take extra care to understand your prospects specific circumstances and identify ways to improve them. Only then should you go to the product pool to determine which products are going to maximize their benefits. This is the difference between acting as an advisor or acting as a product sales person.
When you operate as a comprehensive holistic planner you'll get more referrals, and more repeat business. As word gets out, you may be able to spend less and less on advertising as well. You’ll create a reputation built on a valued service to others.
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