Overselling gets all the negative press in our industry. By "overselling," I mean getting prospects to buy a product they don't need or that is unsuitable for them. However, underselling also is an equally legitimate concern that gets vastly less attention. When was the last time you heard of an advisor going to prison for not discussing a product their client needed? Yep, I thought so!
What is "underselling" exactly? It is closing a sale for one product, but leaving other client needs on the table. It occurs when advisors are so focused on completing a deal that they simply forget to bring up other equally important needs. Classic example: An agent sells a prospect life insurance but never even discusses disability insurance, leaving the person underinsured and leaving thousands of lifetime commission dollars behind.
Why do agents undersell, anyway? There are four important reasons:
1. Lack of time. You may simply run out of time to do sufficient fact-finding. Unless you can probe fully, you will almost certainly leave needs unaddressed and end up underselling. Instead, always be sure to schedule enough time for comprehensive fact-finding. If you do run out of time, get the client to agree to discuss the remaining needs in a future meeting.
2. Lack of confidence. You may be a life insurance specialist, but lack confidence in talking about long-term care insurance. Without sufficient product knowledge, you will almost certainly fall into the underselling trap.
3. Lack of urgency. You may feel that there's plenty of time to address uncovered financial needs. Well, I have news for you. Life has a way of happening to your clients when they're busy making other plans. Encourage your clients to "live for today" by not putting off key decisions. They have nothing to gain and much to lose by waiting.
4. Lack of client funds. You may assume, especially in this environment, that clients don't have enough disposable income to address multiple financial needs at the same time. That may be true for many prospects, but it won't be true for all. It's best to assume that funds will be available rather than forego important discussions that could result in a financial disaster down the road.
Do you recognize yourself in what I've written so far? If so, I encourage you to envision all opportunities to serve your clients. Here's how:
1. Always conduct a comprehensive fact-finder. One of the classic mistakes is drilling down too soon on the first apparent need you uncover in the interview. When you do that, you will use up all of your time addressing that need, but leave other needs unaddressed. It's better to stay high-level so you can probe other needs. Once you complete your fact-finder, get the client to agree to discuss all of the needs uncovered and then immediately solve for the first need.
2. Build your product knowledge. If your clients keep expressing needs that you feel ill-equipped to handle, ask yourself whether it might make sense to augment your knowledge in that area. If not, consider aligning yourself with a product specialist to whom you can refer leads and share commissions and/or fees.
3. Offer all the coverage they need. For example, don't sell life insurance without raising the issues of disability insurance and long-term care. Going unprotected in either case can blow a gaping hole in a client's future financial security.
4. If you provide life insurance, don't lowball the face amount. Use a precise method for calculating current resources and future capital needs so you can recommend a coverage amount with confidence. Also, be wary of relying on benchmark rules such as 10 times income. People are very different, so when you use a benchmark like that, you are likely to undershoot in some cases and overshoot in others.
5. If you're in the retirement planning arena, talk to your clients about products that shelter their assets from market risk. One of the most common consumer gripes I hear is, "Why didn't my advisor talk to me about ways to safeguard my assets?" Don't let this happen to you.
6. If you sell annuities, don't forget to offer income riders for future income needs. Having that type of rider provides huge peace of mind to clients worried about not having enough income to live on in retirement.
7. Commit to ongoing client service. If you commit yourself to staying in touch with your clients, it will be much easier to avoid "underselling." At each future contact, ask them about the unmet needs you discussed in the initial meeting and probe to see if they're ready to take action on those needs now.
8. Stay focused on the client's best interests. Would you let a parent, sibling or close friend drive off with a flat tire or muffler dragging on the ground? Of course not! So why would you let a client walk away with huge holes in his or her financial plan? The appropriate thing to do is to fill those holes by addressing needs as quickly and as professionally as possible -- if not today, then in future meetings.
At the end of the day, ethical advisors need to strike the right balance between underselling and overselling. It's good for your business, and it's the right thing to do.
Jeffrey S. Kopitz is president of the National Ethics Bureau (NEB), a membership organization of background-checked financial professionals. NEB promotes ethics to advisors nationwide and also sponsors an errors and omissions program for qualified advisors. For more information visit www.ethicscheck.com and www.eoforless.com.
