From 1995 to 2004, the Securities Industry Association conducted an annual survey of investor attitudes. According to the 2004 report on the survey:
“84 percent think the industry should be doing more to educate investors. This sentiment has been high since 1995.
“The proportion of investors who believe ‘they know everything one needs to know’ about investing has not risen above 6 percent since the study’s inception.”
The survey also stated, “Investors are most likely to admit they wish they knew more about the different types of investments available to them, and the risks associated with the investments.”
The reason why investors want more education is not hard to figure out. They know they have to make decisions that will affect the rest of their lives and they know they don’t know how to make those decisions.
If 84 percent of investors want more education, and if substantial numbers obviously don’t have it, then what should we do? How about, “Let’s provide it.” One obvious venue in which to provide the know-how is the sales presentation.
Let’s call this early phase of the presentation “Educational Selling” and define it as a step-by-step process in which the advisor teaches the investment concepts that the client needs to understand in order to make an informed decision.
When this method is properly executed, in most cases the client or prospect will ask to buy. Closing is really necessary only when they are firmly planted on the fence.
Among its benefits are:
o Rarely, if ever, will you need to close a sale.
o Rarely will you deal with objections.
o Frequently, you will bring the client to the point he or she asks, “Well, what do you recommend we do?”
And in the process, you will create clients who hold you in such high esteem that they will do what you advise without additional selling.
Chart Board Financial Education
In the overall sales process, the “financial education” step comes right at the beginning of the final interview. You have called the client back into your office. Your proposal is ready, but you don’t dare present it yet. Before you present your recommendations, you make absolutely certain your prospect understands all the key concepts necessary to make an informed decision.
Let’s say you have concluded that Dr. and Betty Bubbalong should invest a portion of the proceeds from the sale of their medical practice in equities.
What do they need to know in order to agree with that conclusion?
At a minimum, they need to know:
o How an investment in stocks has outperformed every other asset class.
o How asset allocation reduces risk.
o How inflation and taxes affects purchasing power of the income from fixed-income securities.
o How time in the market reduces risk.
In my opinion, the best format in which to present these ideas is on a flip chart or white board. Slides are acceptable, but a flip chart or white board is magic.
Here’s why: You are more persuasive standing up than sitting down. When using a chart board or white board, you have to stand up.
Here’s how I might handle the issue of long-run performance of different asset classes. I would stand up, go to my white board, and write these numbers on it, as shown below.