Specialization by product or service allows an advisor to develop greater in-depth knowledge and sales skills. Additionally, specialists can focus their marketing efforts, and their specialization can lead to increased referrals as word of their unique expertise spreads. But there are drawbacks to specialization. For example, if you work only with annuities, you risk overlooking clients’ needs for long term care insurance or investments. Even if you recognize those needs, however, if you’ve promoted yourself as a specialist, prospects and clients might see you as a niche expert and be reluctant to work with you in other areas.
Instead of focusing on single need with prospects and clients, advisors who cross-sell address multiple concerns. They point to several advantages with that approach. Bob Enright, CFP of Burton/Enright Group in Walnut Creek, Calif., says surveys of financial services clients show that clients who have multiple relationships with an advisor are more likely to remain with the advisor longer. “If all you did was provide one investment product to the client, the research showed you had a limited relationship with that client, and it would probably only last a few years,” says Enright. “However, the more things you did for a client, the greater the likelihood of retaining them as a client for a longer period of time.” Another benefit to cross-selling is increased revenue per client. By failing to uncover and address clients’ multiple needs, specialists often forgo the revenue those opportunities provide.
Get the facts
Successful cross-selling starts from the first contact with a prospect, and a systematic and thorough fact-finding session are critical for identifying multiple needs. Elisabeth Plax, Ph.D., CFP, of Plax and Associates Financial Services in Beechwood, Ohio, says she “models” the conversation with prospective clients from the first encounter. If the clients have contacted her to discuss their investment portfolio, for example, she explains that she will need to see their tax return. The return tells her the prospects’ tax bracket and sources of investment income. The information also shows prospects the connection between investments and tax planning and guides Plax’s portfolio recommendations.
Plax follows the same approach when prospects express other concerns. “Are we putting money away for children?” she asks prospects. “How do we separate the funding of children or grandchildren’s college funding from retirement needs? We look at estate planning and I ask if they are interested in protecting as much of their assets as possible or would it be okay if you don’t leave them much at all?” When prospects respond that they want to preserve as much as they can, Plax explains how spending a few thousand dollars a year for long term care insurance may be a better way to protect those assets than trying to hang on to $500,000 or $600,000 that might be needed for a nursing home.
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Ruth Delaney, CFP, CLU, ChFC of Greenleaf Financial Strategies Inc. in Tampa, Fla., offers to do a financial plan with all clients, whether their initial work focuses on insurance or investments. During that process, she “asks a lot of questions,” and the resulting information can illuminate gaps in clients’ plans. “They are often gearing their investments toward some goal, most probably retirement,” she says. “I tell them I’d like to take a look at their entire financial picture to see if there are any holes in it. I look at their insurance policies to see what coverage they have, what coverage they might need, and I go from there. I impress upon them that meeting long term care or disability costs could blow a big hole in their plans.”
Delaney cites a recent case of a couple in their mid-forties. The clients had a reasonable amount of assets but not enough to cover long term care expenses comfortably. “In looking at their picture and going through the report with them, they saw that they would have to spend a considerable amount of money, which would tremendously deplete their assets, if one of them did require long term care,” she says. “So we went from there to talking about long term care insurance policies.”
Even the best-designed fact-finding process can be a waste of time if you don’t recognize clients’ underlying concerns. But that’s easier said than done because it’s natural to focus on formulating a response or the next question instead of listening actively when clients speak. Listening skills can be developed, however, says Enright. During the early phase of his career in the 1980s, his employer provided a daily hour of sales training with an emphasis on developing listening- and sales-skills, not product knowledge. Enright continues to seek training that will improve his communications with clients. “I recently sat through a program from Legacy Advisors in Pittsburgh that furnishes the data questionnaires and information on questions to ask your clients,” he says. “For example, how to not just stop with one or two questions but to keep probing. That was a two-day seminar that I found very helpful.”