I was at a BBQ and over a drink got into a conversation with two people about insurance and investment. The conversation raised the issue of where you go for financial advice, which developed into a rather interesting discussion. I encouraged the debate and treated it as a research opportunity.
Of note was learning about the importance of key words in motivating consumer behaviour - which I will explain. By way of background, the two I talked to have the profile of almost perfect clients. They both enjoy well-above average incomes and high levels of net personal wealth. They were aged 54 and 49 (I asked). The older one is a successful accountant while the other owns his own business and also sits on public and private boards.
Sorry to say, but both had somewhat cynical views about advisors in general, recounting stories of 'idiots' they had met. These were some of their comments. "I don't trust how they make their money. I have heard that they can make 150% on the premiums of some insurance products." "I hate the way they have to sell you something to make money. That must influence their advice." "I've got four life policies. Two of them are more than 25 years old. I should cash them in."
Clearly they were somewhat ignorant as to the way advisors work. Which means that neither of them have proper financial advisors in their lives. The real value from the conversation however was their reaction to some specific words. When I talked about how many advisers work, it was key words that made the biggest impact. Notable among these were:
"Audit." I suggested that a good adviser would be able to undertake an 'audit' of their financial lives, including their investment and insurance portfolios. This instantly got their attention. The word 'audit' has a powerful meaning to business people.
"Plan." They both felt that advisers had tried to sell them individual products, not any sort of financial plan that put everything into perspective.
"Fees for advice." They were both impressed with the idea of paying a fee for a financial plan, regardless of whether the recommendations were taken up. This seemed to overcome the issue of a plan that might favour an adviser's remuneration. Interestingly the accountant said "So, what would you pay? A couple of grand?"
"5-step process." This really hit home. I explained that a financial plan looks at the 5 key aspects of your financial life and how it was almost impossible to separate them. They asked what the 5 steps were but I told them to ask their advisor. As you can guess the accountant in particular loved the word "process." He had never thought of it as a process before, just a sort of 'sell-as-much-as-you-can' approach.
Watch the reactions of client when you talk to them. Are there some words that seem to have a considerably greater impact on them? There will be, it's just a matter of recognizing them.
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