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Tuesday, September 2, 2008

Educating your prospects will make you poor

Many financial advisers feel it’s important to educate their prospect. There’s an idea that if you educate your prospects, they can make good financial decisions. I disagree.

And advisor I know well has 18 years of education, 20 years of experience and various credentials. His prospects will never know a fraction of what he knows, no matter how many hours he spends educating them. It’s his job to know what choices the prospect should make and tell them so. The professional is responsible for the client taking the correct action (and is held to that standard in the securities industry). If his client wants to buy stock options and that’s not suitable for them, the financial adviser will be held liable if he allows the client to make that investment. Therefore, it becomes the adviser's judgment to know what they should do.

Of course, you still need your prospect’s agreement for your recommendations. So rather than educate them by telling them (the usual mode of education in this country), please educate them by asking questions. They already know the answers and you can have them educate themselves.

Here’s what educating (and selling) by asking questions sounds like:

Professional: What are your plans when your health changes?
Prospect: What do you mean?
Professional: You know that as people age their health declines. So as you age, what are your plans when your health changes?
Prospect: I never really thought about that seriously. I have good health insurance, and always assumed that was adequate preparation.
Professional: Health insurance, of course, provides for you when you have an illness that they can cure in a few days in the hospital, but what happens if your health changes such that you can’t go shopping, you can’t take care of the house, and you can’t walk up stairs?
Prospect: Well I certainly don’t want my children to have to take care of me.
Professional: So what solutions do you think are available to you?
Prospect: I’m not really sure. I know people go to nursing homes, but I could barely afford that.
Professional: What other solutions do you think are available to you?
Prospect: There’s insurance, isn’t there?
Professional: Do you think you should consider that as one of the alternatives?
Prospect: Yes, but I don’t know anything about it. I’m sure it’s expensive and I couldn’t afford it.
Professional: How much do you think it costs?
Prospect: Jeez, I have no idea, what, maybe $500 a month?
Professional: What if you could get insurance to allow you to stay in your home, have help come and assist you, and could get that for $250 a month—would that seem to be a reasonable solution?
Prospect: Is that really available?
Professional: If it were, would you want to know about it?
Prospect: Sure. I don’t want my children to have to take care of me and if I can’t take care of myself, what other choice do I have?
Professional: How would you pay for that?
Prospect: I have some investments from which I don’t take all the income.
Professional: For example?
Prospect: I have an annuity that I reinvest and I also have a mutual fund that I reinvest.
Professional: How much a month are you reinvesting?
Prospect: It’s over $1,000 a month.
Professional: So if the insurance turned out to be a good solution, you know you can pay for it?
Prospect:—Yes, if it’s about $250 a month.

Just by asking questions, this “sale” and the prospect’s education is mostly complete. Notice how much more efficient this is than “telling,” handling lots of questions and potential objections. When prospects see the solutions for themselves, they cannot object to their own insights.

The payoffs to educating selling by asking questions are enormous. They increase your sales success in five ways:

1. Questions direct your prospect’s thoughts. When you speak, your prospect’s mind wanders, he thinks up objections, he questions the validity of your facts, he questions your credibility and he may even think about what to have for dinner. But when you ask a question, you get laser-focused attention. We have been continuously trained to answer questions as accurately and completely as possible, starting from the first grade. Correctly answering questions is even the basis for most television game shows. So when you ask questions, you take advantage of your prospect’s cultural training to provide their full attention and best answer.

2. Questions allow you to find out the necessary facts (ethically important for any advisor and legally important for securities licensees to comply with the “know your client” rule).

3. Emotional questions allow you to determine the “emotional facts” (your prospect’s likes/dislikes). If you don’t know how your prospect feels, you cannot make a recommendation that feels “right.”

4. Questions increase your stature and credibility in the prospect’s eyes. The fastest indicator of a person’s intelligence and caring are the questions they ask.

5. Questions allow you to maintain control of the conversation because the person asking the question controls the conversation, while the person answering has lost control.

Post provided by Javelin Marketing