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11 do's and don'ts on how to handle your competition

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Who doesn’t love regulation? At one time, the financial services industry and the airlines were regulated. Everyone charged about the same amount for the services they provided. Competitors differentiated themselves through their extras. Brokerage firms talked about the depth of their research. Airlines offered decent food in coach.

Firms stuck with their specialty. Stockbrokers sold stock. Bankers created loans. Insurance agents sold insurance. When these industries deregulated competition, it drove fees down (and many firms out of business). Companies moved beyond their traditional competencies and competed in other categories.

Imagine this: You are talking to a sophisticated prospect about investing. Insurance is your primary topic, yet you realize they use other financial services, too. You want to turn the prospect into a client. But who else has the same idea?

1. Traditional competitors

Let’s assume it’s not the guy at the next desk because, ethically, people at the same firm don’t chase after the same prospects. The agent at a different firm on a different floor of the same building is a competitor. Your prospect mentioned they are shopping around, dropping the rival firm’s name.

Do’s: Be professional. Say something like, “They are a fine firm.” Sell your own firm on its benefits, length of time in business, commitment to the community, ratings from A. M. Best and other relevant agencies and awards won for product quality.

Don’ts: Run them down and don’t say something like, “Are they still in business?” or question the ethics of the rival agent.

2. Financial services firms 

The big brokerage firms have traditionally been called wirehouses because the branch network was connected to their Wall Street home office where trades were executed. Now, they offer insurance products as they compete for their client’s share of wallet.

Do: Position insurance as your firm’s core competency. Study up on your competitors. It’s likely their range of insurance products is smaller than yours. Your client has other needs besides investment insurance products. You likely offer health insurance, long-term care insurance and personal lines, either through your agency or an affiliate.

Don’t: Give up. Assume they have a broader range of products or more prestige, so you will ultimately be the loser.

3. Independent financial advisors 

Often called Registered Investment Advisors (RIAs), they offer a product range similar to the wirehouses. These advisors often began their careers there before setting up shop on their own. They are often under the umbrella of another firm providing back office and clearing services for their practice.

Do: Stress the financial viability of your firm. Promote the bricks and mortar advantage. Is the firm name on top of the building in big letters? Promote their expertise.

Don’t: Imply their advisor might run off to South America and the firm would disappear. They are highly regulated too. Often the products (brokerage accounts, CDs, insurance) have a degree of protection or come from third party providers.

4. Online insurance providers

People think they can cut out the middleman and buy direct by shopping online. Aggregator websites might offer comparison shopping with side by side prices.

Do: Explain that insurance is a unique product. Features and benefits are not standardized. They’ve seen the TV ads urging people to learn about the gaps in their coverage.

Don’t: Pretend its 1960 and the Internet doesn’t exist. And don’t dismiss these competitors as “firms you’ve never heard of.”

5. Bankers 

It makes good sense for firms offering retirement savings accounts to offer other retirement products too. Your local bank branch may have a Series 7 licensed financial advisor onsite or a phone call away. Your prospect may like their bank.

Do: Acknowledge them as a competitor. Explain banks are unique because their traditional products (CDs, savings accounts) carry insurance. Other products the bank offers (mutual funds, stocks, bonds) don’t carry the familiar FDIC insurance.

Don’t: Belittle bankers as all being tellers with limited knowledge of insurance products (they would need proper licensing to sell insurance.) And don’t imply that the teller is getting a finder’s fee for suggesting insurance. 

6. CPAs and attorneys 

In some cases, these professionals may also be licensed to sell certain investment products. In other cases, they might refer clients with specific needs to a selection of financial advisors they know personally.

Do: Draw them out. What advice has their CPA or attorney given concerning their insurance needs? Engage the accountant or lawyer. Will your prospect introduce you or bring up your name and firm?

Don’t: Suggest other professionals should “stick to their knitting”. And don’t brush off or find fault with their suggestions as your prospect presents them.

7. Financial planners 

Many investors suspect a plan provided by an advisor or agent is a thinly disguised sales pitch to promote product. They like the idea of an arm’s length specialist who gathers information and prepares a plan, allowing them to implement it where they choose.

Do: Show respect. Ask about the planner’s certifications and credentials. How did they find them? Hopefully, it was by referral. Separate planning and execution by asking where they are implementing the suggestions within the plan. If the planner is also selling them product, maybe they aren’t as arm’s length as they thought.

Don’t: Argue by saying: “Why do you need to pay for a plan? I’ll do one for free.” You are becoming confrontational and reinforcing the value of an independent plan.

8. Retirement planning specialists

Transamerica has estimated 10,000 baby boomers retire each day. This has created a market for specialists, especially in the world of senior executive compensation and benefits. As your executive client approaches 65, their firm might offer this as a perk. These people know how to talk to executives and present a plan they like. They suggest consolidating their investment assets with them, losing you a client.

Do: Get in front of the issue. Continually highlight retirement planning in client reviews. Executives also know they only need one person to do one job. If they are offered this perk, they can decline saying: “My agent has this covered for me.”

Don’t: Lose your cool and become emotional. “You can’t do this to me. We’ve been together ten years. You can’t leave me now!”

9. Neighbors and barbers

A little knowledge is dangerous. They may have a hair stylist who also dispenses stock tips. Although they haven’t taken the plunge, they feel confident they will make a fortune as a day trader. They don’t need advice or insurance.

Do: Let them tell their whole story before responding. Repeat back the details so they know you were listening. Stress the importance of investing and how it fits into their future plans. If they lost (X) dollars, would they be able to recover? Will their barber tell them when to sell in addition to what to buy? Is their barber taking some degree of moral responsibility if the advice doesn’t work out? 

Don’t: Laugh in their face. Become confrontational. Put them on the spot asking if their barber is so good at stock picking, why are they still cutting hair?

10. Late night TV

You can’t sleep, so you channel-surf the infomercials. One suggests now is the time to buy real estate. Another is enthusiastic about gold. The third talks about strategies for day trading the stock market. Your prospect feels they don’t need insurance from you.

Do: Be respectful. Suggest they do some further Internet research. Have these infomercial advertisers had problems with the regulatory authorities? What does the fine print on the screen say? Likely, there are no guarantees.

Don’t: Dismiss the infomercials and those who watch them as idiots. And don’t say, “Go ahead, see if I care.” 

11. Prospects themselves 

Investors have short memories. When the stock market goes up, they forget about the bad times and think the good times can continue forever. They sometimes assume “investing is easy.” They have unrealistic expectations about how much money they will need in retirement. They see no problem and rationalize they need no help.

Do: Acknowledge their perceived expertise. Do some financial modelling together. What will their retirement look like based on their current assets and investment allocation? Is there a shortfall? Are they willing to work longer, take less in retirement or save more today? Now you have established a problem that needs attention.

Don’t: Belittle their skill or call them an amateur. And don’t walk away after warning “you’ll be back” after they make mistakes on their own.

Everyone has competition. As an insurance agent affiliated with a reputable firm, you have ratings, reputation and awards to position the company. Big buildings inspire confidence the way an online-only presence doesn’t.

You have professional certifications. Your firm likely offers investment services similar to the brokerage firms seeking inroads on your territory. Keep your cool and make your case.

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