[Editor's Note: This is a guest post from Mark Zoril, AIF®, a reformed financial salesman who saw the light and now runs his own company designing flat-fee small business retirement plans. Although this is not a paid post (I don't have those), he is a paid advertiser on this website. I hope you enjoy this post as much as I did. It provides an inside look at the industry.]
“Coffee is for closers!”
How closely does this (profanity warning) classic line from Glengarry Ross or scenes from The Boiler Room resemble the meetings or sales tactics of the modern financial professional? Sorry to let you down, but not that much. But advisors certainly use sales nonsense and p
loys to add clients and grow their business. And you are the target!
Over the years, I have attended numerous company meetings, conferences, and industry events. I worked at a conventional broker/dealer, RIA for 17 years prior to setting up my own firm three years ago. I am well aware of the training. Advisers are taught to meet with people and provide value! The financial services industry offers more “value” than you can handle. All at a cost!
Before I share some of the tactics, let me add that there are many wonderful advisers doing great work with their clients in a straightforward manner. I would trust many of them to provide good advice and guidance to my family. I continue to get great ideas and information from them.
However, most advisers work as part of either a small or a large distribution system. Distribution systems focus on sales and most rely on effective sales strategies. Information and education only gets you so far. You need charm, networking, slick delivery, an angle–whatever it takes. Good sales skills are highly valued in the financial services industry, which is considered to be a “people” business.
These tactics appeal to your ego, fear, envy, and/or greed, and often rely on your ignorance and/or apathy. Since ignorance and apathy are in plentiful supply (no offense intended), many of us are susceptible to the tactics used to promote investment products and services.
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Here are ten effective sales tactics, ranked by impact on your finances. I would put each into one of two categories, with some overlap. The first category consists of methods used to get meetings with potential or current clients. The second category includes strategies to “add value” and persuade people to invest with you or purchase one of your products. There are certainly others (storytelling, analogies), but these are some of the most effective and frequently used. Let's get started!
# 10 Waiver of Liability for Long Term Care Insurance
I saw this many years ago at one of our district meetings. An advisor introduced the idea of having your clients sign off on a letter relieving the advisor of liability in the event that the client does not purchase long term care insurance and is ruined financially because they need long term care. Basically it is saying to the client, “I tried to help you purchase long term care insurance, but I am not responsible for your cheap, stupid decision not to buy it.”
# 9 Updating Your Beneficiary Appointment
This is one of many ploys used to get a meeting with a client. Often used by advisors recently assigned to your account or new to the firm. The meeting invitation might go something like: “God forbid something happen to you, we want to make sure that the money you have earned and saved goes to the people most important to you. I have another meeting in your area with Joe next Tuesday, would you be available to visit and update this?” Right – that is all they want! Be prepared for new product sales at this meeting.
# 8 Regularly scheduled meetings
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Many advisory firms promote the need for quarterly or semi-annual meetings. The idea is to stay in front of your client as much as possible to “provide value” and grow your relationship. But are these frequent meetings really necessary? They have got to be agonizing. What drivel is discussed at these? Performance of small cap value stocks in former communist countries? Emerging political issues in micro and emerging Asian economies? Updates from their brilliant economist on how trends in consumer durables and recent uncertainty in short term interest rates will create opportunities in something? Rumors about more loosening (or tightening) of Fed policy?
If you like these so you feel “better informed”, than I am happy for you. But regular meetings are a great way for advisers to get paid by introducing new products and opportunities to their clients.
# 7 Social Security Decision
This is a newer one that is gaining popularity. You will hear about the 39, 81, 947, or 22,342 different ways you can take your social security. It is a complicated decision – if you don’t make the right choice it could cost you hundreds of thousands of dollars. Becoming an expert on helping people make the right decision on their social security is a great way for an adviser to add value and grow their business. You get help – they get sales.
I feel strongly that many people could definitely benefit from professional help on this. But why shouldn’t advisers just charge for the service? Maybe $500, or $1000 or $1500? Considering how beneficial it could be, that would be a very fair price to pay. Seems like a good model to me – get a client a day for $1000 and help them on their SS – that’s $250k/year. (I should do that). But why settle for a one time flat fee when you can make so much more over a longer period of time on other products?! BTW, there are on-line services and books that can help people review their options.
# 6 Client Appreciation Event
Oh yeah, baby! Show your clients how thankful you are for their support. Hold some impressive event for your “best” clients. Better yet, let them invite their friends and anyone else – with money. Create the event of the year that they can’t miss. Puhlease – give me a break.
Everyone should know that these can be great ways for advisers to grow their business. I have attended training sessions on how to run a successful client appreciation event. One adviser explained how clients actually wrote checks to invest right at the event. Advisers described how they brought along additional advisers that might have expertise in different areas of financial guidance and made sure that they were dispersed evenly amongst the crowd. These advisers would mingle from person to person to identify opportunities that they could follow-up on later. Leads, leads, leads!
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# 5 Implied Complexity
At a company meeting about 10 years ago, my then direct manager was providing guidance to our sales team – a mix of experienced and new advisers. One comment he made was to occasionally use industry words that might confuse your clients. Don’t go overboard with it, but just enough to make sure that your clients realize how much they don’t know and how much they need your help. Several years prior to that, my then manager suggested that when working with clients that I should come up with some explanation to increase their international holdings as a part of account reviews. There was no strategic reason to do this – it was just “doing something” for the client. An essential message of many in the financial services industry is that investing is too complicated and risky to do yourself. You don’t have the time, expertise, or experience to handle the nuances – you need us!
# 4 Fear of Missing Out
Similar to Implied Complexity, this is commonly used with Assets Under Management (AUM) programs. Advisors imply that their “experts” or “system” or “process” is watching the markets 25/8, 366 days a year. Every day, hour, minute, and second they will be looking for opportunities, taking advantage of trends, identifying the right investments. Don’t worry about a thing – a professional is watching your money and making it work for you. The implication is that without their managed program, you will lose out – and you can’t do that, can you? If you don’t pay them to have sophisticated professionals and systems manage your money, you will miss out on growth opportunities or take huge losses that you might otherwise avoid.
# 3 Value/Emotional Connection
Many years ago, values based selling was all the rage. The idea was to find out, by a series of questions, what was really important to a client. Find out what makes them tick – what do they really want to accomplish. You need to know your client intimately – know them better than they know themselves, and certainly better than their spouse knows them. You need to be their shrink, their bartender, the person they can trust with their hard earned money. You need to probe to learn more about their experience, values and motivation. What happened in 6th grade on the playground with Ronnie? Have you recovered from your public humiliation in college at the petting zoo? How well did you get along with your Mom? What keeps you awake at night? Once you “connect” with your client and form this understanding and bond, they will trust you forever, give you all their assets, refer everyone they know to you, and never ask you about fees.
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# 2 Dinner/Lunch Seminar
If you have never been to one of these, consider yourself lucky. Good advisers have these down – they can be a gold mine of revenue and commissions. It is a great way to start the relationship with a potential client. Use an effective advertising campaign, interesting and relevant topic, and maybe a guest speaker to increase attendance. The strategy for most presentations is to reveal just enough information or demonstrate enough competence to get a follow-up personal meeting. During the Q&A, the speaker may say things like “Your situation is really unique, we will have to meet separately to review that.” BTW, many investment firms help pay for these events. Do you think that might influence the kinds of products an adviser recommends??
# 1 Financial Plan
This is the big goal! A financial plan is clearly the best way for an advisor to grow their business. The more plans you do, the more assets you will attract. Most advisers know that a financial plan will lead to product sales. They are trained on how to introduce financial plans, how to set them up, how to manage the collection of data, how to deliver and “sell” from the plan. If you cannot grow your business from financial planning, you might as well quit.
At my prior firm, over the course of several years before I left, the company changed its training emphasis to financial planning as the key to acquire assets. Advisers were measured on how many plans they did. More plans resulted in more assets under management. Understand that when an adviser does a plan for you there is a very high likelihood the plan will recommend buying something from the adviser. You get a plan – the adviser gets a sale.
I will never forget one of our training sessions. A big producer presented his use of financial plans. He explained how he introduced the idea of a financial plan to all of his clients. He provided his script and phraseology (lots of fear). After he had visited with a client, and developed the plan, he would delay delivery of the plan and explain that it is being “worked on” even though it was ready to go. What was most impressive, though, was how he used 4 specific pages on the plan to sell everyone a guaranteed minimum withdrawal benefit rider for their accounts. Ka-ching! This was his process and he was awesome at it. (And a hero in the company). I was so impressed I wanted to buy one – even though I knew it was a crappy product! (Author’s note: I am a huge fan of financial planning as a tool to help people prepare for their future – but not as a sales ploy).
I am not anti-adviser at all – I am anti-nonsense! I think many people benefit from at least infrequent guidance from a competent professional. Just avoid the sales baloney.
Tips to Avoid Salesmen and Their Tactics
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Here are some quick tips on how to avoid these tactics and have a healthy, productive relationship with your advisor:
- Unless you are simply bored, don’t meet with your adviser without a bona fide reason.
- Do not become friends with your adviser. This isn’t easy. I have broken this rule and am good friends with some of my clients. However, if you believe that you would have a hard time firing your adviser, avoid getting too close.
- YOU control the meetings with your adviser – not the other way around! THIS IS CRITICAL. Send them an email telling them what you want to cover – this is your meeting, not their sales opportunity. If they are going to introduce a new idea or product, you want to be aware of that before the meeting! If you are cool with that, tell them you want information, not sales jargon.
- Meet with your adviser by phone or video conference. Yes! We do most of our client meetings now by video conference and it is awesome. More efficient for us and a lot less costly for our clients. We have found that the meetings are much more on task and focused – less socializing and distractions. We get business done.
- Never accept any gifts from your adviser. Try and keep the relationship purely professional.
Have you come across any others? Which one of these has been tried on you? Did it work? Who has the best story of how they were “sold”? Comment below!
Great post. At my hospital, there are 10-15 “Lunch and Learn” seminars that spend 10 minutes talking about a general topic and 20 minutes on self promotion and scare tactics. Many of my residency classmates “Just aren’t interested” in teaching themselves basic knowledge and would rather pay somebody else to take care of that for them – not realizing that they are being sold inferior products and services for more money than it would cost them for better coverage and advice. Having an understanding of these tactics is like understanding logical fallacies – you can’t avoid them if you don’t know what they are.
Gotta go have my scheduled meeting on a complex topic way too difficult for me to understand. I hope my family is protected- but I’m sure my buddy/agent will take great care of me…
Thanks. Scare tactics are very common. It is disappointing that your employer doesn’t actually vet the content and approach of the firm(s) providing the information.
No one vets anyone, anywhere. In fact, sometimes it’s the attending that invites his/her adviser to talk to the residents not knowing he/she is already being taken for a ride!
There is a trend (certainly not an absolute rule) that people who go into academics arent as interested in “managing the money”. It can be one reason why they dont go into private practice but of course there are a variety of reasons. They dont have any experience which allows them to be better teachers with money.
Thanks for taking the time to write this. While I’m very familiar with all of it at this point, I’m sure some folks will find it useful. Unfortunately I’ve come to the conclusion that most physicians should not use an advisor. Investing is like coding. At first you don’t think you want to do it or don’t think you have the time or find it boring or whatever but once you have been in practice for a few years, you realize its something you need to play a very active role in. Frankly investing is easier than coding. The rules don’t change much and if you are spending a lot of time on it then you are doing it wrong.
Thanks Rex. I enjoyed writing the post. Over the years, I have become convinced that 99% of investors are better off spending less time “watching” or managing their investments once they get them up and running.
Great reminders. I actually did go to one of those dinners, knowing full well that it was a sales pitch and I really had no need for an adviser at that point. Knowing all that going in, I STILL nearly made an appointment to meet with an adviser separately. Luckily I caught myself and said I would call them if I’m interested. They do those dinners because they know they produce leads.
I enjoyed reading the article Mark, thanks for writing it. I would like to add that there actually are some wonderful business relationships that exist between advisor and clients. It all comes down to intent. On average, you’re correct, but please don’t forget, or discredit, that some advisors actually have good intent and meet with clients for the purpose of actually getting to know them to help them. For me personally, I have 60 of my closest friends and family as clients, and we fish, golf, eat, go to each others’ weddings, and it has nothing to do about raising money. If and when business even comes up, it’s to ensure they understand the strategy as well as possible and make sure the allocations are a proper fit, even if it means them reducing exposure.
This large paintbrush used to paint all “close” advisor-client meetings/relationships as terrible, and all advisors as fee-sucking leeches, is sad, and only continues to accentuate this hatred against advisors, even the good ones. I wish there’d be more posts about how to do it right rather than posts about how to avoid them entirely.
The paint brush is appropriately sized in my view. There are very few good advisors. It isn’t WCI job to educate the financial industry and I doubt if there were such posts that they would read them or act on them. If the industry fixed its problems (which it wont bc that entails making less money), then this wouldn’t exist.
I am glad that you enjoy your clients so much, Don. Awesome. I mention in the article that I am friends with many of my clients as well. The point is that if an investor let’s their personal relationship get in the way of firing their adviser or asking tough questions about service and value, they are doing themselves a disservice. They need to make sure they can end the professional relationship without harming the personal one. That is not easy to do.
Also, I am pretty sure most readers won’t read this as concluding that all close relationships as “terrible” or “all” advisers as fee-sucking leeches. I typically prefer not to portray myself that way.
My “financial adviser” did all he could to become my friend for exactly the reasons mentioned. It’s tougher to say no to a friend, fire a friend etc. He even went so far as to say that he would love to get the families together even if we didn’t buy anything. But once we didn’t buy, never got that invite….
I agree that a small percentage of advisors are good advisors and it is certainly OK to be a friend with your advisor. But there is no doubt that there is a lot of truth in what Mark wrote, and you know it as well as I do.
I met with an advisor that was recommended by a friend before I found this site. He seemed like a nice guy but now that I have done minimal reading I can see all the red flags that popped up. Fortunately I never met with him again, even though my friend keeps telling me how great he is.
We had our IRAs in a target date fund at fidelity and he wanted to do an analysis and move our accounts to his company because their funds have “generally performed better”.
He specialized in physicians and since us residents are so poor he doesn’t charge us for the first five years while we build our relationship in hopes of keeping us as a long term client. He claimed multiple times in the meeting that he doesn’t make a dime off us for the first five years. I didn’t look into his services after the first meeting so I don’t if he was going to just sell us loaded funds and wait to charge us an AUM fee later, but I can’t imagine he was actually going to work for free for five years.
He also wanted to make sure we bought our insurance from him. I don’t remember if he was going to sell us term life or try to get us to buy whole, but from what I’ve read it best to keep insurance and finance separate.
Before we finished our first and only meeting he was asking for referrals.
That’s fairly typical. They make their money off disability and life commissions in the first few years until you have a portfolio worth managing. Even if they were working “for free” during residency, if 1 out of 5 of those residents sticks around for the long term, it is probably worth their investment in all 5.
All financial advisers are not bad. But they have to make a living also, and the way they do it is by charging you for their services.
We are all physicians, we made it through difficult premed classes, medical school, internship and residency/fellowships. If we accomplished all of that, with a little self education, we all should surely be able to manage our investments. This is especially true today with all the low cost indexed mutual funds.
Read about Lazy Portfolios, find the one you like and stick with it. You will end your career with a large nest egg. Check out Vanguard and Fidelity websites, read Bogles books and Bernsteins.
No school or hospital should allow these advisors to come in as they are only there to sell you some costly product or service. Had a broker or two that told me to take my business elsewhere as I did not have enough activity
Mark–
Excellent post! I loved the video link to the Glenn Gary Ross movie…I will have to check that one out on Netflix. And like Alec Baldwin, you must have “brass balls” using your real name and putting this info out there! I bet there will be more than a few financial “professionals” who will be ticked off by this.
I too was suckered in by a rep who somehow made it into our residency program for a presentation on life and disability insurance. I remember talking to my wife about how nice he was and how he would call on my birthday, etc. Such a “great guy” I thought. Soon I wised up and realized its all a long con–he was waiting until I finished residency and then pounce with whole life insurance, investment advice, and more hollow friendliness. Some would call it “building relationships” but I’m more cynical.
In short, the last 3 days of WCI posts have been quite the assault on the financial services industry. We’ve learned how the payment model is screwed up (AUM and commissions), then learned how advisors use scare tactics and scams to sell products. At least we can avoid some of the problem by hiring a robot!
It’s a fun watch! Glad you figured things out sooner rather than later – this will save you a lot of money and time. I wouldn’t say that I am on a “mission of mercy” but it is very refreshing to work with people in a straightforward manner. Advisers that make this change have a whole new outlook on their career and opportunities. Rick Ferri has done a great job of writing about this transformation in his approach.
Very good points. I also loved the “Free lunch and learn” at Med School from the 40 different insurance providers selling disability coverage. And the pitch “Buy it now, you’re healthy and young and you could have basal cell carcinoma and never be able to get it again!”. I did always enjoy the free sandwich and then went about my rotations.
I do believe their are good advisers out there. I work with a group that my family has for years. They are comprehensive and I let them manage some of my investments, but not all. I do believe they add value because of the overwhelming amount of information out there (even on this site), and I don’t have the time or desire to figure it all out. I do think reviews are good, if the intent is good as you mentioned. But I personally rather have my adviser reach out periodically, than never hearing from him. One thing I hear from colleagues who feel they are small fish in a big pond.
Yes, there are good advisers that offer their services with a minimal amount of nonsense. And most people could use guidance, at some point in their life. In fact, next week our firm is releasing the results of a survey that we did with the employees at our plan sponsor clients over a 12 month period and only 4% of the employees indicated during enrollment that they were DIY investors. The remaining 96% wanted some level of assistance in setting up their accounts.
That’s pretty typical I believe. Most people actually do want and need a solid financial advisor. However, even reasonably priced financial advice is expensive stuff, preventing many who could use it from obtaining it.
I agree that there are good advisors. I use one for guidance and really like his services when I need something (but I still do my homework).
When I visit with new folks, I always tell them first that I don’t make financial moves on impulse and may not be interested in changing anything at the moment. I figure it’s fare warning. I listen to what they say and head home to google. I usually type the name of whatever product they are pitching followed by the phrase “scam,” “pro con,” etc. after it. You’d be amazed that this quick search will cut through a lot of the jargon related to most financial “products.” I used this quick method with “whole life insurance pro con,” “equity indexed whatever pro con,” and “disability insurance pro con” as well as many other products. I also check out WCI and bogleheads forums to get more information. Then I sit on the idea and eventually make a decision over the next few weeks/months.
I always find it funny for a financial advisor or insurance salesmen to spend 20 minutes going over their idea of the best “product” ever and then immediately ask if I’m ready to go ahead with whatever it is. I spend more time than that purchasing a TV.
Great point.
In our residency we had a lunch that was explained ahead of time as education on contract review. Well it turned out to be reps for multi state hospital company recruiting, with some very basic contract information here and there.
So umm…how do you find out about these financial lunch/dinner seminars? I’d love having a bite of a nice piece of steak while they drone on about whatever. Since I’m all readup on WCI and the Boglehead forums as well. 😀
Good post. I would assume that most people know/have had experience with these sales tactics, assumptions can be dangerous though.
It is hard to not become friendly with your clients or advisers, not impossible, but hard. The reason this line is crossed is that people want to like/trust their adviser and it is both a personal/financial relationship. Although, there are certainly organizations who preach to their sales reps to become friends with their clients to peddle their crap onto their “friends”, I see this all the time. A financial plan should be both personal and financial.
I disagree with “Information and education only gets you so far”. My experience with this statement is that it gets you nowhere, especially at the bigger firms like the one Mark worked at. These firms don’t want knowledgeable people, it tends to lead to less/no VUL or annuity sales. Someone with my pedigree probably couldn’t even be hired at a large “finanical planning” firm, I know too much!
As an advisor and business owner, I don’t understand what’s wrong with marketing my services? How else does any business grow without a good marketing plan?
A tactic is defined as an “action or strategy carefully planned to achieved a specific goal”.
If you don’t have a ‘tactic’ or strategy, then you won’t be in (any) business very long. What good is it to be a competent and trustworthy advisor with no clients? So yes, one of my goals is growing my practice. Guilty as charged.
Seems the author is taking the most negative slant on each topic and making a lot of assumptions. For example, I conduct Social Security workshops. People approach me afterwards stating that they had no idea all the rules, regulations, and considerations that are involved. SSA POM has 2,748 rules with half being exceptions to another rule. By developing a coordinated plan along with their other retirement assets, they may decide to make a different filing decision, wait to file, or in some cases, continue to work a bit longer.
Yes, it helps to get me in the door with a HANDFUL of prospects. Yes, it’s a lead-in to other services, and what’s wrong with that? I’m not tricking people. I tell them up-front, “I do these workshops a) to get information about an important subject that I’m passionate about b) you get to meet me in a non-threatening environment and c) a handful of you will become clients”. And, becoming a client usually takes months, sometimes years. People don’t just run up afterwards asking can they please sign up for my services. Doesn’t happen that way. People are smarter than that.
I would love for the author to show me how to get a client a day. That would be the most successful marketing strategy I’ve ever seen — a client each day? If that were possible, I’d do nothing but Social Security workshops and be the premiere expert on it bar none…better than Kotlikoff and Reichenstein combined. Charging people $500 or $1000, in my experience, does not work as they’re not willing to pay it. They don’t believe that it’ll make a difference (until they actually see it). Unless they’re a referral, people want see if my work is worthy of their time, then they MIGHT consider hiring me for other services. It’s a long process, and I give away WAY more advice than what I’m actually paid. I do a complimentary analysis, and FEW people will ask, “What are you opinions on this…or what about this policy I bought a few years ago?” Or, I might ask, “I see you’re doing this or that, would you like a second opinion?” I always ask to be invited in, not kick the door down.
At a recent workshop comprised of mostly engineers at a large firm here in Atlanta, I asked, “How many have a Power of Attorney and Advance Healthcare Directives”? Out of 30 people, 2 raised their hands! This is typical. Heck, I have to continuously get on my physician clients to get it done, and they see everyday the terrible situations that can arise if you don’t have this stuff in place. It’s not always about what’s easy to do, it’s are you going to do it? I stay on them until they get it done.
You can also do a Client Appreciation Event that’s professional and not cheesy. You can have a nice dinner or wine tasting, let them know what’s going on at the firm, and leave it at that. It doesn’t have to be the way the author describes. I don’t see anything wrong with showing appreciation as it takes a lot for someone to trust me with their financial affairs. If they want to bring a neighbor or friend, then cool, but I don’t “encourage” them do it. If the neighbor or friend becomes a client, then that’s great too. I’m in the business of growing my practice, and sure, I’d love to clone my best clients.
Our business is unique in that emotional events affect our clients financially: marriage, kids, divorce, college, promotions, layoffs, disability, death of a loved one, etc. It’s very difficult for us (and them) to detach emotionally from their accomplishments and tribulations. When a client is happy, I’m happy. If sad or suffering, I’m sad for them too. I’m not trying to be their shrink or bartender, or a even shoulder to cry on. I am a person that can help them see through the fog as related to their finances b/c at the end of the day it’s not my money.
I agree the article has a negative slant. I also agree that giving away valuable information (instead of just being salesy like most of these are) is a great way to get quality clients and do some good at the same time. Unfortunately, most docs aren’t as cynical as they should be with regards to your industry, but after being burned a few times, some of us are probably too cynical!
I disagree that Advanced Health Care Directives are all that important for most people. Attorneys and financial advisors think they’re really important, but those of us who actually use them on the back end know they aren’t very useful at all. When the time comes, if you’re unconscious, we ask the person that cares enough to be by your bedside what they think you would want. A conversation with them matters far more than the paper. So have the conversation. Exceptions occur of course, such as when your unmarried partner that you want to make the decisions has a different idea from what you’d want than your brother does.