• If I can do a sales practice, then I should do it.
• If a marketing tactic generates results, then it must be right.
Those who believe in the first statement do things like claim expertise about a product or technique even though they have limited experience. Or they persuade seniors to replace their perfectly adequate annuities or life insurance policies with new contracts in order to generate new commissions.
Similarly, those who subscribe to the second statement send prospecting letters to survivors listed in newspaper obituaries or use leads generated from “Press 1 Now” telemarketing campaigns that might not be FTC compliant. Or they may tell prospects Social Security is on the brink of failure in order to position the products they sell.
Both statements are not only problematic from an ethical perspective, but they also reflect short-run thinking that can make it harder to succeed as a financial advisor. In order to create a successful financial services business, you have to establish and nurture a strong professional reputation. The minute you engage in ethically questionable practices, the more likely you will be perceived as someone lacking integrity. And we know what happens to the long-term reputations of such advisors.
To embark on a sustainable path to success, always avoid shortcuts and do what’s right for your clients. Trust us . . . taking the ethical high road will always pay the highest dividends over time. Here are five key examples to consider:
1. Responsible e-mail marketing: E-mail lead generation is a crucial strategy for growing your business. But don’t forget the importance of doing it the right way, not the expedient way:
• E-mail legally—Comply with all the provisions of the CAN-SPAM Act of 2003.
• E-mail ethically—Treat prospects, customers, and ISPs as you would like to be treated—with respect.
• E-mail intelligently—Balance risks with rewards and adhere to best practices in order to communicate professionalism to the marketplace.
For more information, read our article Responsible E-Mailing: Three Steps to Worry-Free Marketing at NEA’s online Ethics Center.
2. Fact-based selling: Instilling fear, uncertainty, and doubt (aka FUD) – either in your direct mailers or in prospect meetings is a losing proposition. Selling the benefits of a product relies on facts and reason to persuade people to buy. Selling through fear, on the other hand, relies on base emotions and irrational impulses. When weak agents resort to FUD selling, their sales lack depth and staying power and often result in buyer’s remorse within the 30-day free look or later. Instead, always ground your sales in hard facts. Behaving as a fact-based “educator” rather than a fear-based manipulator will generate more persistent sales, higher customer satisfaction, and a stronger professional reputation over the long haul.
3. Self-identification: Don’t hide the fact that you’re an insurance agent and that you sell life insurance, annuities, or other insurance products. Also make sure to clearly identify the insurance companies you represent and, if you’re securities licensed, your broker dealer. Although this is basic advice, you’d be surprised how many prospects remain in the dark about their advisor’s true status. And if they feel deceived about it later, they’ll think less highly of their advisor.
4. Fact finding: Advisors often struggle to strike the right balance between careful fact-finding and quickly closing the sale . However, spending more time on fact-finding will almost always be the right choice. It prevents suitability issues later, and it identifies multiple sales opportunities for future development. And don’t forget, advisors who take the time to really understand their clients will have a stronger reputation than those who do minimal fact-finding and relationship building.
5. Presentation practices: In the presentation stage of the sale, advisors often avoid discussing facts that might derail a sale. Downplaying or ignoring surrender penalties and fees or not making a distinction between guaranteed and projected policy values are common examples of this self-defeating practice. However, getting to the close faster—and to receipt of your commission check sooner—may ultimately hurt your business’s long-term survival. Five years from now, when a client surrenders his policy and gets hit with an unexpected fee, will he buy from you again or refer you to friends and family? And will this “misunderstanding” lead him to file a regulator complaint or spark anerrors-and-omissions insurance claim? Why not prevent potential negative outcomes by doing the right thing from the outset. Our best advice: spend as much time as it takes to educate prospects during the presentation. This is not only a great relationship builder, it’s also a proven method of preventing future errors-and-omissions insurance claims.
At the National Ethics Association, we believe there is no easy, quick path to success. Expedient sales practices might take you one step close to a commission, but derail the process of building a strong reputation and sustainable business. Only by knowing what you stand for ethically, writing these values down, and aligning your business with those values over many years, will you win at the long-game of financial services sales.
For more information about ethical sales practices, please visit the National Ethics Association’s Ethics Center atethics.net. For information on affordable errors-and-omissions insurance for low-risk financial advisors, please visitEOforLess.com.