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Business transformation in 12 months or less – can it work?

6 months ago, we took on a new client.

He is typical of most advisers. He cares about his clients, was trained to sell products, and is worried about the future impact that RDR will have on his business. A particularly big clawback that nearly finished his business, was the trigger for change.

The first thing we did was to look at his business, and the initial hurdle was a lack of data. There was no system to manage revenues and he relied on data from product providers. This is a common problem in South Africa, and we enlisted external help from our friends at Linktank to get the data.

When we got it, what we found shocked him.

segmentation table

Of 110 clients, 11 were responsible for 90% of his regular business revenue (excluding initial commissions) and only 4 were generating enough to cover his costs.

Clawback liabilities on 79 clients showed that he was still getting “unpaid” for the work he had already done!

I call this the “Transaction treadmill.” Most brokers are trapped on it, and it’s not just those in the risk space.

The next 3 months involved unpacking what his clients really wanted and valued, what he wanted to deliver, and he put together a series of documented services. We discussed pricing options and he set some fee levels. I’ve cut corners here, but he will tell you that this was hard work. He stuck with it and had faith, but he didn’t always have confidence.

Then came the tough bit. Articulating it all to new prospects and existing clients. This is where theory meets reality! And we spent a lot of time crafting an entirely new conversation.

The first breakthrough came in the very first conversation. For the first time ever, he pitched and won a direct fee. How much? R2,500. Don’t mistake this as a failure. It is a massive step and I was so proud of him.

Fast forward 6 weeks, much practice, and some pressure from me to “just keep having the conversation”.

He now quotes (and is winning) fees of between R9,500 and R17,500 for initial advice, and has set retainer fees at R10,000 and R30,000 a year. What’s really interesting, is that in none of those conversations has he talked about policies or products.

Go and tell him that clients won’t pay fees for advice. Go and tell him that South Africa isn’t ready. He will smile, and politely disagree with you.

Product providers are damaging advice relationships

RDR brings a requirement for transparency into the nature of relationships between customers, their advisers and product providers. This transparency is especially relevant around issues affecting:

  • The charges that customers pay and what they are for (cost)
  • The responsibilities that each party has (responsibility)
  • The control and influence that might exist in conflicted situations (independence)

Most of the participants in financial services are quick to defend their attitude toward customers, but if my experience is anything to go by, there is a problem.

In March 2014 I set up a medical aid policy with a well-known large provider. The policy was recommended through my Independent Financial Adviser. As far as I’m concerned, my relationship is with my adviser, and the product provider is simply the supplier of a product.

3 months after inception, I received a call from the product provider to directly sell me a supplemental policy. When I asked if my adviser knew we were having this conversation, the telesales agent said yes.

When I contacted my adviser, he said he wasn’t aware that the conversation had, or was going to, take place, but he wasn’t surprised since product providers frequently do this. Apparently  it’s a common practice among certain (most?) multi-channel life assurance companies.

The product provider has no knowledge of me or my circumstances, and the only question asked was whether or not I had smoked tobacco in the last 12 months. They were clearly happy to sell me a policy on the strength of that information.

Who is responsible for the sale and any advice?

It turns out the product provider would have paid 80% of the commission to the adviser and retained 20% for themselves. Where are the lines for responsibility?

I wrote to the CEO and received a reply from the head of marketing, essentially defending the action as being intended not to maximise sales, but rather to ‘support advisers’ on what is an uneconomical activity for them. An offer was made to engage further on the discussion, and when I chose to do so, there were no further replies.

The exercise featured in my book Keep-Calm &-Survive-RDR as a study in what is wrong with the relationships underlying the financial services industry.

18 months later, in October 2015 I received a cold call from the same telesales department of the product provider, this time trying to sell me an additional benefit to my existing medical aid policy. Again,  I asked the salesperson whether my adviser knew we were having this conversation and this time, I was told that it was in my interest to deal directly with the product provider since going through my adviser would involve the addition of commission to the premiums, which could be saved if I by-passed the adviser.

That’s an interesting way to ‘support’ advisers.

I e-mailed my adviser to explain what had happened, and copied the head of marketing into the e mail. The same one that had failed to engage with me 18 months earlier.

He confirmed that he had in fact listened to the call recording, and was horrified. The call centre operation was blamed as having not followed procedure and evidently the actual salesperson was in her first month. Did she decide to make this sales script up on the spot? I doubt it. And if she didn’t, at what point does the training team realise that what the call centre staff are trained to say will come out on a recorded call. Either way, the company has trained this script.

There were, again, profuse apologies  from the product provider. I doubt they are genuine. I don’t trust them, and unfortunately, that lack of trust impacts on my adviser.

Less than a week later, I had yet another call from the same department on exactly the same matter. I terminated the call as quickly as possible and sent another e mail to both my adviser and the head of marketing. Apparently, I have now been removed from the marketing database. It remains to be seen whether I will get further calls.

As a customer, I am left wondering what is going on. As a former financial planner  of 25 years, I know exactly what is going on. The industry is controlled by big insurance companies who largely treat customers and financial advisers with complete contempt.

I don’t really care who my insurance is with, as long as the policy delivers the benefits it promises to. I’d even pay a bit more not to be treated with contempt. These companies are ruthless in their quest for distribution and unless the culture changes (it won’t), or the regulator hits these firms hard (hint!) things will not change.

There is significant value in the client/adviser relationship, and the quality and independence of advice from control and influence from a third party product supplier.  If financial advisers are to be seen as professionals, product providers must stop, or be prevented from, engaging in the many behaviours that control, influence and damage independence.

What do you think?

Quote of the week

Not failure, but low aim, is a crime.

James Russell Lowell


Quote of the week

Make each day your masterpiece.

John Wooden

Quote of the week

Unless you try to do something beyond what you have already mastered, you will never grow.

Ralph Waldo Emerson

Quote of the week

Discontent is the first step in the progress of a man or a nation.

Oscar Wilde

3 rules of marketing communications

A challenge that just about every adviser we talk to, tells us they are struggling with, is finding more and better quality clients. With the advice landscape changing over the last few years there has been the recognition that working with absolutely any and every client, irrespective of their circumstances or revenue potential, is no longer viable. Advisers have been changing their business models and many putting strategic plans in place to grow and develop profitable businesses.

The way advisers are going about identifying and attracting clients to their business has been changing and becoming more scientific. We have written about finding your ‘ideal’ client and segmentation in previous articles, but for many adviser firms, “marketing” is becoming a much bigger priority.

So many business only “do marketing” when they need to increase their flow of new enquiries. As such businesses end up doing “marketing” in fits and starts, which results in peaks and troughs in sales flow too. It creates a yo-yo effect. In reality such sporadic forays into marketing are unlikely to be effective. Marketing activity has to be consistent and sustained to really work.

Marketing communications is only one of the marketing disciplines, however developing compelling marketing copy is important, whether that’s your brochure, website, email, direct mail letter or social media. You can read literally thousands of books and articles on how best to write compelling copy, but here are a few simple rules to follow. In his brilliant book, Marketing Your Services, Anthony Putman describes them as the Critical Steps of Marketing communications.

Rule 1: Get me to recognise that you’re talking to me

Some Marketing copywriters call this ‘getting their attention’. Unless your headline or first paragraph helps me to see myself, or my situation, in the words, it will just be “noise” and filtered out. During these days of information overload, your prospects have become highly skilled at filtering what they read. Your headline has to get through what Putman describes as the “wall of indifference”.

How do you do that? By asking a question to which I’ll answer… “Yes!” or by describing my ‘pain’ (challenges, worries, frustrations) so accurately that I immediately think “that’s me you’re talking about”.  As David Scarlett suggests in “Marketing Manifesto”, if you can describe my situation better than I can describe it myself, I’ll immediately assume that you understand my problem and that you also have the solution.

Remember in today’s media clutter you have only a matter of seconds to capture initial attention – you’re initial marketing needs to be short, succinct and have impact that grabs attention.

Rule 2: Tell me how I’ll benefit from your services

Sounds simple but in reality few marketing communications (in any sector) set out the benefits clearly and precisely so that prospects can visualise it for themselves. Help them to see what outcomes they can expect, how you go about making a tangible difference to their lives and why engaging your services is the best decision they could make. For many, knowing what an investment plan or protection policy is, or can do for them, is double Dutch in financial services technobabble, but ‘protecting your family’s future’ or ‘giving your children the best start’ people can emotionally understand. Testimonials and case studies have a role to play here, in bringing what you do to life.

Rule 3: Get me to respond!

This where you have to get me to do or say something that tells you I’m interested in your services. And I’m not suggesting you offer a free iPhone. By responding to such an offer I’m simply telling you that I’m interested in winning an iPhone, not that I’m interested in your services. So make me an offer related to your services and make it easy for me to take advantage of it.

Something like a free guide – e.g. “Top 10 tips for getting financially organised” downloadable from your website in return for my email address is all you need. By responding I have immediately moved from being a target prospect to a qualified prospect and I have, even in just a small way, accepted your invitation to start a relationship with you. The offer doesn’t have to cost you much, but it does have to build your credibility with me. If you can do that I’m likely to be more receptive when I receive your next communication.

What’s more I’m likely to need to hear from you at least 6 times on average, before I consider becoming a client. So, you need to ensure your target clients know exactly who you are, what you can do for them and where to find you through repeated and consistent marketing activity. You need to be front of mind when they need you. To make sure you are front of mind, you need to be ‘everywhere they look’, constantly reminding them that you’re there, until they are ready to take up your services.

So marketing little and often can have a profound effect on building a constant stream of clients, rather than the peaks and troughs of stop-start marketing efforts. With this in mind, follow these 3 rules and you won’t go far wrong. But remember, if you can’t sustain your marketing, you’re probably best not starting in the first place – it may be just money down the drain.

Quote of the week

My interest is in the future, because I am going to spend the rest of my life there.

Charles Kettering

Marketing Masterclass – Part 8 – Creating your action focused marketing plan

In this, the final part of our 8 part marketing masterclass video series, I look at how to create an effective marketing plan. One that you can implement and stick to, rather than one that finds its way into a filing cabinet never to be seen again.

Marketing Masterclass Video 8 – Creating your action focused marketing plan from Steve Billingham Consulting on Vimeo.

Quote of the week

Don’t wish it was easier. Wish you were better.

Jim Rohn