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.
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.”
It’s possible to develop probing skills without formal training. Richard Stumpf, MBA, CEBS, CFP, of Financial Benefits Inc. in Wichita, Kan., says that the CFP-education program exposed him to the different financial disciplines but he hasn’t had any formal training in listening skills. Nonetheless, he believes his fact-finding process naturally lends itself to uncovering multiple needs with clients. Most of his conversations with prospects and clients start on a modular or single-theme topic. For example, the person is turning 65 and wants to understand the financial impact of reaching that age. Stumpf says the ensuing conversation usually includes several separate but related themes. “That means we have Medicare and Social Security issues to deal with,” he says. “The paychecks stop so we have retirement income planning issues. What’s the tax status of that? How does that impact the estate plans? With any and every one of the various topics we address with a client, it’s a fairly easy lead-in to take it from a modular set of questions to a comprehensive set of questions on any one of the financial planning topic areas.”
Walking the Walk
Be prepared to invest the time and energy required to master your new offerings before attempting cross-selling. That knowledge will help you recognize sales opportunities and prevent potential embarrassment if the client responds to your offer with detailed questions. Stumpf says that additional training and education have allowed him to expand his services over the years. Like many financial advisors, in his early career he “was one of the guys who spent most of my nights and weekends working because that’s when I could meet with people.” That routine put a strain on his family life, though, so Stumpf started studying and offering pension plans, health insurance and employee benefit plans so he could call on companies during the day.
He credits part of his subsequent success to ongoing professional education; in fact, he estimates that he completed almost 300 credit hours during the past two years. Additionally, each transition to a new market increased his skills inventory and his cross-selling opportunities. “I just shifted my practice, but that didn’t mean I went brain-dead on what I was doing up to that point,” he jokes.
Expanding client’s perceptions
There is a potential obstacle to cross-selling: Just because you’re ready to expand your services doesn’t mean clients are ready to work with you in a new capacity. The risk of limited perceptions is particularly high if you previously had positioned yourself as a narrowly focused specialist. Rolf Winch, CLU, ChFC, of Lifetime Financial Partners in Rockville, Md., started his career working with individuals but decided to shift his focus to business owners by offering group health insurance. When he decided to expand his services a few years later, he encountered skepticism. “What I found out over a period of several years was that once clients look at me as the person who is providing their health insurance, why would they possibly talk to me about their estate planning and investment needs?” he asks. “I was the group insurance guy. I knew about health insurance, but what did I know about investments?” Winch subsequently began offering 401(k) plans to the small-business market, a change that resulted in clients valuing his investment expertise more highly.
Winch strongly recommends that less experienced advisors build relationships with other financial professionals who can serve as resources or mentors while they develop their expertise with the new product or service. That network can provide invaluable guidance when the advisor encounters cases that are beyond his experience. “Having those kinds of relationships allows you to come back to your prospect after you’ve asked them all those questions with some real solid answers,” says Winch.
Cross-selling can boost your business and strengthen client relationships. While expanding your services and product line might take you out of your comfort zone initially, the long term payoff is substantial.