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Why You Should Offer Debt Reduction Help

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As people struggle to hold their financial lives together during the COVID-19 pandemic, reducing or eliminating debt has become a critical area of concern. Debt reduction services are a way for advisors to tap into this trend and position their practices as more solution-focused and less about products.

(Related: Social Security COLA: What’s Working, What’s Not)

Handing your clients and prospects an understandable broad-spectrum debt reduction/elimination plan will go a long way toward increasing your marketing’s effectiveness and make you unique and memorable. Reducing client debt makes it easier for you to sell the products and services that will improve their lives.

No Magical Solutions

As an advisor, you are probably aware that debt reduction often consists of many small steps rather than a solitary magic bullet. However, to be effective, a debt elimination strategy must go beyond folksy financial wisdom and to-do lists.

Much of the advice given by financial entertainers like Suze Orman centers around finger-wagging and scolding clients about their money habits. Shaming your clients into compliance is an ineffective approach that seldom creates lasting results.

Instead, you must permanently change your clients’ money mindsets, encourage their efforts, and keep their accomplishments in front of them, so they do not get discouraged.

Tech Tools

Various new computer-based programs allow advisors and their clients to monitor and track their clients’ progress. These programs achieve results in much the same way as diet and exercise trackers, creating awareness of bad habits and allowing users to imagine how their lives will look when they stick to the plan.

Texas-based advisor Erica Sherwood uses a proprietary software program that allows clients to pay off debts strategically, without having to drastically alter their lifestyles, get a second job, or any of the other methods suggested by most financial “gurus.” Sherwood loves this software tool because it helps her change lives. “I now have something tangible to show my clients what life without debt will look like,” she says.

Steps to Take

While every debt solution must, of course, encompass the client’s unique financial situation, all useful plans contain a few common elements.

Debt reduction can be easy if a client makes a good income and has multiple assets. But, most of the time, this won’t be the case, and you’ll have less cash available with which to work. Comprehensive debt reduction plans must mesh with your client’s cash flow and reflect the reality (however ugly it may be) of their current situation, along with their savings and retirement goals.

Strategy Session: This is not an aggressive, tough-love session in which you shame your client for bad money choices. Instead, this is a fair assessment of possible solutions to their cash flow crisis. Remember, you are not laying down the law. You are helping people ways out of the debt trap, hopefully forever.

Tactical Session: This is where you explain actual products and services you will use to help achieve cash flow and savings objectives. If you are using a technology-based solution, you can provide a demo at the tactical meeting.

Implementation: The implementation meeting is where everything comes together, and the plan is set in motion. If your client needs training on the software portal or phone app, you must set aside time for that purpose.

Bottom line: Helping your clients pay off debt quickly, and cheaply has nothing but upside for you as an advisor. Your clients will love you for reducing their stress levels, increasing their savings, and keeping their credit in good standing. In turn, you will get more referrals and increased sales as they discover the money, they never knew they had.

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Eric CoonsEric Coons owns Kaleidoscope Insurance Solutions in Springdale, Arkansas. He manages more than $100 million in fixed and indexed annuity contracts.