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.”
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.