CPD: Selling sprouts – 5 financial advice marketing tips that no one has told you about

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Life insurance is like sprouts; most people recognise that they are good for you, but very few people want to eat them.

Enter the phrase ‘financial advice marketing tips’ into Google and there’s a high chance you’ll be bombarded with a plethora of ideas on how to design your website, improve your search engine rankings, and run a social media strategy. But whilst there is undoubted value in giving attention to all these areas, making them a primary marketing focus may represent, for many advisers, a case of ‘putting the cart’ before the horse.

In this article we will address the most foundational marketing concepts for financial advisers, including target audiences and niche markets, value proposition alignment and the science of trust. This article will also examine the cognitive biases exhibited by clients, and how to adjust for those biases to ensure optimal advice and business outcomes, especially within the context of life insurance advice.

Growing the market

As one industry expert[1] observed, life insurance is like sprouts; most people recognise that they are good for you, but very few people want to eat them. Making sprouts easier to buy will never change that.

The challenge in growing the market for life insurance advice – and effectively competing in that market –  is therefore less about reducing any friction points (for example by simplifying processes), and more about developing a comprehensive understanding of who you want to eat those sprouts, and how to persuade them to do so.

Define your target

A clearly defined target market is not only important for the marketing of a business, it is a central construct in a business’ very existence. Afterall, without a market, there is no business. There are many important reasons to clearly articulate a target market for your advice practice:

  • It helps make marketing more efficient by minimising effort/spend targeting the wrong customers
  • It is easier to truly tailor a value (product/service/fee schedule) proposition to the needs/preferences of a specific group, which in turn can aid differentiation
  • It is easier for staff to be aligned in terms of focus, service delivery and sales effort
  • It can be a convenient reference point against which to gauge business viability and explain short term variations in performance (for example if the target market suffers disruption)
  • It provides a focus for more specialist knowledge, which can also aid differentiation

Whilst purists may suggest identifying a target market should be done before even entering into business, a more pragmatic approach for financial advisers is to reflect on any special interests, skills, knowledge or connections they themselves already have, and then try and match that to the optimal group of customers.

According to Kotler and Keller[2], to be sustainable, a market segment must fulfil several criteria: including being differentiable, accessible and substantial.

The individuals who comprise that market must share common characteristics, either in their traits, circumstances, or their need for advice. A target audience must be easy to identify, so they can be accessed in a commercially viable way. It needs to be big enough to support a business, but not so broad as to be meaningless. This last point can be crucial; some advisers are reluctant to articulate a specific target market for fear they may be turning customers away, but in reality there are other aspects of an advice practice’s proposition (fee schedule, areas of expertise, location), that effectively rule out some types of customers anyway, so the fear is unjustified. At a time when adviser resources are more stretched – and revenues more pressured – than ever before, minimising the time spent with the ‘wrong ‘clients can make or break a business.

A starting point for defining your target audience could be your existing customers and considering why they chose to do business with you. Do they share any common demographic or psychographic characteristics? What types of customers do your competitors target? Can your current customers support your longer-term business goals?

The answers to these questions – coupled with a thorough understanding of the type of customers (the personas) you want to attract longer term – can help you narrow your focus and adapt your business to match.

Find your niche

Within your target market, you may want to identify specific subsets or groups for whom you can be even more tailored and targeted. A niche strategy involves differentiated ways of reaching individuals within that broader target, based on insights into their unique needs or circumstances, (for example, channel choice, or situational characteristics).

Financial Advice marketing consultant Stephen Wershing[3] identifies a number of foundations on which you can create a niche:

  • Values
  • Experiential
  • Educational
  • Psychosocial
  • Technical

The basis of a Values niche is a shared philosophy, or literally shared values. The adviser believes in what the client believes in, and that forms a basis for trust. A focus on socially responsible investing could be one example.

One way to differentiate from other advisers is to create a unique experience. That could be by providing service through a unique channel (for example, video conferencing only), or at a differentiated level (think the advice equivalent of the Lexus Customer Care program, or Virgin’s recently cancelled limousine service[4] for first class travellers). Successful service-based niches are those that put more emphasis on ‘different’ rather than ‘better’ (which everyone already claims to be).

Sometimes a target market needs to be brought up to speed on relevant issues before they can make an informed decision. This is the basis of an Educational niche.

When clients go through a major life event with financial consequences, for example if they receive an inheritance, get divorced, or a large insurance payout, they are often in need of financial advice, and often in need of substantial background information and education to understand their new situation, before they’re even ready to seek out and accept advice.

A variation on the Educational niche is the Psychosocial niche. Some clients need more than advice to get through a life transition, they need to work through a disorienting or painful experience. Simply dispensing recommendations will not work, because there are other things on the client’s mind. A Psychosocial-based niche is one where advisers create a process that includes special steps for assisting clients in coming to terms with changes in their lives. This may well involve partnering with other – nonfinancial – experts.

2017 AFA Adviser of the Year, Charlie Fraser[5], is a good example of an adviser operating in this kind of space. His niche involves the families of those caring for loved ones who have lost their capacity to make complex financial decisions, through catastrophic illness or injury, and have received large financial payouts. In conjunction with his business partner, a wellbeing specialist, Charlie provides his clients comprehensive financial and human services – which Charlie likes to call ‘wellbeing advocacy’ – to help them manage what can be very complex affairs.

The final category of niche, the Technical niche, is offering advice or a service that other advisors do not have the knowledge, skills, resources, or connections to provide. Obvious examples include advisers who specialise in groups such as medical professionals, airline pilots, small business owners, or expats, all of whom unique circumstances and advice needs.

Align your value proposition to your target audience

Clearly defining a target audience makes it easier to tailor your offering – products, service experience, and fees – to that audience. Without such tailoring the ability to genuinely and sustainably differentiate your services from other ‘specialists’ in that space will be severely compromised.

An important part of this tailoring will involve truly understanding the ‘personas’ of your target clients. For example, if your niche is high net worth professionals, does your office décor and professional presentation match their expectations? If you specialise in medical professionals do you understand their language and the unique aspects of their profession? Is your office wheelchair friendly? Do these clients typically prefer analogue communication and face to face meetings, or are they tech savvy? If you serve a particular ethnic group, have you prepared materials in their first language? Do your clients typically have lumpy income streams that dictate fees are paid once, at the end of the financial year, or are smaller, regular payments preferred?

The car and airline industries provide helpful illustrations of this point. Lexus cars are essentially Toyotas but are sold and services through different dealers that offer an entirely different experience. Jetstar is owned by Qantas but the total experience, from booking a flight, to the airport, to the seating and onboard catering, are completely different, in line with the different target market each brand aims to attract.

Whilst the potential questions about your clients and their preferences are endless –and the answers are sometimes unexpected – there is one question for your business which summarises them all – how exactly does the totality of your offering reflect the preferences of your chosen target group?

The science of trust

For knowledge-based service relationships – where the client has little ability to independently evaluate the quality of the service provider – trust is crucial. A good haircut is easy to judge, a financial plan less so, especially in the early years.

The extent to which trust is important in the client/adviser relationship was actually quantified in the Zurich/AFA/Beddoes Trusted Adviser study[6], which found that the more clients trust an adviser:

  • The more they will refer them to their colleagues, friends and family;
  • The more information they will share, enabling more relevant, quality advice
  • The more fully they will involve their adviser in their financial affairs and significant life events;
  • The more they will follow through with advice and the more effective the advice will be in terms of improving their financial situation;
  • The more they will value their adviser and the services he/she provides;
  • The more satisfied they will be;
  • The more likely they will be to pay advice fees willingly, on time and without question; and
  • The stronger and more enduring the adviser-client relationships will be.

But how does one build trust? The answer ‘by doing a good job’, begs a follow up question – ‘what is a good job?’.

The same research found that clients actually judge an adviser by his or her interpersonal skills, rather than their technical competence (which is seen as a hygiene factor):

“The burgeoning trust that occurs over time with a trusted advise is largely a result of the interpersonal skills and emotional intelligence of the adviser; their ability to communicate clearly, simply, and in language that the client understands; their ability to listen effectively and to understand and respond appropriately to the client’s personal and financial needs in a way that shows empathy and demonstrates that they genuinely care about the client and have their best interests at heart.

In the words of one client; “Trust is about caring, understanding, listening and explaining what is required”.[6]

The Trusted Adviser research findings are consistent with those of an earlier study[7] of marketing relationships, by Christiansen and DeVaney, which demonstrated that communication plays a key role in determining the level of trust, and subsequently trust is the key driver of relationship commitment.

Life insurance advisers are selling sprouts, not lollies

It is easy to sell lollies. Lollies tastes nice. They are full of sugar that our body craves, and we have to use our willpower to stop ourselves from overindulging. Selling more lollies is about making them easier to buy and harder to avoid.

It is much harder to sell sprouts. Although they are good for you, sprouts just do not taste good to many people, which makes them a lot like life insurance.

As much as many advisers recoil at the mention of the ‘s’ word (selling), the reality is that if you are recommending to a client that they buy something fundamentally good (life insurance), in most cases you are going to need to ‘sell them’ on your recommendation. Naturally, we aren’t talking about any high pressure or unethical practices, we are talking about fulfilling a professional responsibility to:

  • Identify a need;
  • Awaken the client’s awareness of that need;
  • Recommend a solution to that need;
  • Persuade them to act on your recommendation.

Knowing your client means truly understanding them

Central to the art of persuasion is understanding the way clients think. That’s because, far from being rational, clients (and indeed all of us) are full of ‘cognitive biases’ which have a huge impact on the way we understand, interact with, and receive information and advice. Several of these biases, explained below are particularly relevant in a financial advice context.

The ‘availability’ bias sees us place more importance on the most recent information we have received. This is why we see sales of home insurance increase after a flood, and people seek life insurance after the death or illness of someone they know. The actual risk of them actually suffering that event hasn’t changed, it’s just that they are more aware of it[8].

In a situation where clients don’t have any ‘available’ experience or data to reinforce their need for life insurance, advisers can draw on news and examples (e.g. claims stories) that remind people of the risks and their consequences.

Loss aversion[9] is a bias which explains why our fear of losing is psychologically twice as powerful as the pleasure of gaining the same amount. Positioning life insurance as covering school fees is therefore less powerful than positioning it as preventing your client’s children losing their place at school.

Another shortcut at play in this example is our overconfidence about what the future will look like, including our future income and the state of our health. Overconfidence about health has long been a barrier to consumers recognising the need for, and value of, life insurance, and data and tools which make it easier for people to understand the real risks can be useful in such circumstances.

Related to this last point is the importance of framing information.

Same information, different outcomes

The same information, framed differently, can lead to very different decision outcomes. For example, there’s a surprisingly big difference between how we react to probabilities expressed as percentages (say, 10%) and how we respond to odds expressed as frequencies[10] (one person out of every 10). Percentages are abstract and hard to imagine, meaning people often make perceptual mistakes in interpreting percentages. Natural frequencies, on the other hand, are much easier to imagine; particularly for less numerate people. Quantifying health risks as frequencies rather than percentages is therefore likely to be more easily understood and more effective.

Similarly, communication about life insurance which is framed around the sum insured – rather than the annual premium – is more likely to elicit the perception of cover being an investment rather than a cost.

Sums insured can also be tricky, thanks to our tendency to get ‘anchored’ to certain numbers. Clients actively seeking life insurance may well approach advisers with a particular number in mind: “I need a million dollars cover!”. Encouraging the client to think in terms of the size of their mortgage, or their income, or their monthly credit card bill, will make it easier for them to visualise what genuinely adequate cover looks like.

Presentation is important too.

Financial products and information can often be complex and confusing and understandably, people struggle to make sense of them, losing concentration and switching off. Sometimes, it’s the sheer amount of information that can be the barrier to action, leading people to become overwhelmed. This makes it important to present information to clients in ways that require minimal effort to absorb and understand – things like tables, charts, and explainer videos in plain language.

We all seek social proof

We look to others for behavioral guidance when we are unsure, in an unclear, unfamiliar, or ambiguous situation. The greater the number of people who find any idea correct – the more a given individual will perceive the idea to be correct. This is the Social Proof heuristic, and in a way, it is outsourcing some of the decision-making process to others, relying on their work and research. Social proof explains everything from the value of trusted referrals, to our preference for established, familiar brands (if everyone else is buying that brand, or choosing that policy, then it must be good). Experiments[11] have shown the need for social proof can influence everything from our uptake of recycling to our paying of bills on time.

For a financial adviser, in addition to the value of seeking referrals from existing clients, another clear example of how to leverage the power of social proof is through the use of client testimonials, and claims stories, which can be published on the company website, used in client newsletters, or included in videos and printed marketing materials.

Conclusion

Dr. Philip Kotler defines marketing as “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit[12].

If financial advice marketing was therefore drawn as a pyramid, topics such as search engine optimisation, social media, and website strategy would be represented by the smaller sections towards the peak. The bigger foundations of marketing – without which the top of the pyramid would collapse – are the fundamentals of target market selection, value proposition design, client insights and sales messaging.

Advisers who understand their target clients – in terms of who they are, what they want, how they think and where to find them – will be better equipped to:

  1. provide services which are more tailored to the needs of those clients,
  2. provide advice which is more effective, and
  3. ensure their business gets on, and stays on, a sustainable path.

 

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Notes:
1. ‘Role of Persuasion: How to sell sprouts’, Battersby M., Insurance Thoughtleadership.com, January 2019.
2. Kotler, P., & Keller, K. L. (2016), Marketing Management (15th ed.), Pearson, accessed September 2020.
3. ‘6 Types of Niches for Financial Advisors to Differentiate Themselves’, Wershing S., kitces.com, July 2019, accessed September 2020.
4. ‘Virgin Atlantic to scrap free limo for upper class passengers’, Calder S., independent.co.uk, February 2020, accessed September 2020.
5. ‘Why what it takes to be a winning adviser may not be what you think’, Zurich Investment Insightz newsletter, October 2017, accessed September 2020.
6. ‘The Trusted Adviser, Honouring the Client at Every Turn’, AFA Whitepaper, Zurich, The Beddoes Institute, Association of Financial Advisers, May 2013.
7. ‘The Antecedents of Trust and Commitment in the Financial Planner-Client Relationship’, Christiansen T., DeVaney S.A., Association for Financial Counseling and Planning Education, 1998, published on ResearchGate, accessed September 2020.
8. ‘Leveraging Behavioural Science in Insurance: A Systematic Review’, Raghuram A., University of Pennsylvania, Scholarly Commons, August 2019.
9. ‘Prospect Theory. An Analysis of Decision Making Under Risk’, Kahneman, D., & Tversky, A., published in Econometrica, Volume 47, March 1979.
10. ‘Violence Risk Assessment and Risk Communication: The Effects of Using Actual Cases, Providing Instruction, and Employing Probability Versus Frequency Formats’, Slovic P. et al, Law and Human Behaviour, July 2000.
11. ‘East: Four simple ways to apply behavioural insights’, Service O., Hallsworth M., et al, The Behavioural Insights Team, https://www.bi.team/publications/east-four-simple-ways-to-apply-behavioural-insights/
12. Dr Phillip Kotler answers your questions on marketing, Kotler P., kotlermarketing.com, accessed September 2020.

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