Skills That Succeed: A Communication Guide for Risk-Based Financial Advisers

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PREFACE

The idea for this book first emerged in the late ’80s at an industry talk given in Brisbane. At the conclusion of my presentation Frank Daly, a highly regarded and respected adviser in our industry at the time, complimented me on my talk, and then asked, When are we going to see the book? I asked him what he meant, and in a very complimentary way he suggested that he could not recall a more simple explanation of the importance of selling life insurance and how to go about doing it.

He further suggested that, to his knowledge, no one had ever written a book on this topic in Australia and that I could be doing the industry a great favour if I undertook the task. High praise from such a respected person in our industry.

I vividly recall both his suggestion and my (without much thought to it) prompt reply along the lines of, I wasn’t worthy of the task, and even if I was I would never have the time to undertake it. Strangely, however, Frank had planted the seed of an idea that never left me over the years. Sadly, Frank recently passed away just as I was enquiring of his whereabouts to let him know about the book.

On separate occasions – usually after I had spoken at industry events – others made similar suggestions, but I always used the same no time excuse to change the subject.

Then in September 2010 I had lunch in Sydney with a Financial Adviser from Melbourne, Daryl LaBrooy. Daryl had heard me speak at the Financial Planning Association’s annual conference in Melbourne in 2009 and arranged for me to do a one-day workshop for his Group in May 2010. At the conclusion of the workshop he made similar comments to those of Frank Daly regarding the book.

Over lunch that September day he reminded me of a comment I often made during the one-day workshop that when speaking to new prospects he should use the opportunity, where appropriate, to talk in terms of if you had died yesterday… in order to create a note of urgency in getting people to address a specific situation.

Russell, if you had died yesterday, everything you have in your brain would have died with you. As a consequence, you would have missed a golden opportunity to have left your legacy to our industry! That last statement by Daryl caught my attention – my legacy to the industry.

Daryl was in fact pointing out that my current sharing was my living legacy but if I died without recording that knowledge, then everything I had learnt from others and had further developed myself would go to the grave with me! At that time I could see an opportunity to give something back to the industry that had been so good to me.

I concluded my lunch with Daryl by promising him I would give the matter serious consideration. Thanks Daryl.

Finally, in December 2010 I felt the time was right to seriously consider the project. After discussing this with my wife, Jacqui, who was totally supportive of the project, I committed myself to put pencil to paper and undertake my legacy to the industry.

I started out quite enthusiastically for a few months, but, frankly, after a few chapters I began to doubt whether I really had something to offer to the industry and so I put the project on hold. Then one day in 2011 during a game of golf with an industry friend, Rob Pedersen, he made a highly complimentary comment that made me recommit to the task. Thanks Rob.

As I reflect on my career, I keep coming back to how grateful I am that I found a career path that brought not only meaning and value to my life, but also kept me excited and motivated for four decades.

There were many highlights during the 40-year period, far too many to mention, but a couple stand out:

Firstly, THE MILLION DOLLAR ROUND TABLE. MDRT is the Premier Association of Financial Professionals. Founded in 1928, it is located in the United States and runs an annual conference in June of each year. That conference is the greatest hall of learning for all advisers who want to build a professional career in the financial services industry.

I attended my first MDRT meeting in 1973 and it changed my life. For the first time, I saw the opportunity of developing a professional practice and sales skills which would provide an ongoing service throughout my career for my clients should they live too long, die too soon or become disabled along the way.

The ideas that I learned from MDRT about sales, personal and practice development were never-ending. Suffice to say that for over 40 years I have continued to go back to the annual meetings for renewal, inspiration and growth.

A second highlight occurred in 1998 when our eldest son, Matthew, joined me in 1998 as my succession plan. From the outset, and to this day, Matthew has maintained a great work ethic which has enabled him to forge an excellent career path and develop his own reputation within the industry. A few years ago Matthew’s eldest son Timothy joined the industry, thus extending the family line into the third generation!

Throughout my 40 years as a Financial Adviser I always made a point of emphasising to the newer advisers that most of my knowledge had come from listening to other far more experienced advisers than me. I was always open to new ideas and concepts, and readily gathered these from the numerous Association of Financial Advisers/MDRT conferences and industry events I attended on a regular basis.

I borrowed ideas from the greats of our industry, Russell-ised them, and then when the opportunity presented itself, passed them on to others.

What follows within the book from this point is the sharing in-depth of many of those ideas. Hopefully, they will add meaning and value to your life also.

INTRODUCTION

THE PROBLEM OF UNDERINSURANCE

As long as love and a sense of obligation continue to exist in abundance in our society, there will always be a need for life insurance and life insurance Advisers.

Frank Sullivan

In personal discussions with many financial advisers over the years – at both national and international industry conferences – I have always found that there is one common topic of discussion: an underinsurance problem in our respective countries. And it is always followed by the same question: what could we do about it? We all had an unshakeable belief that we had at our disposal the only commercial product that can turn expectations into certainties and promises into guarantees – life insurance! Yet we all faced this same dilemma: how could we get our message across to the majority of the people in our countries?

I believe that in Australia there are a number of reasons behind this old and ongoing problem of underinsurance.

First, in Australia there is an attitude of she’ll be right mate which shows an unwillingness to confront possible future problems and a preparedness to procrastinate even when people’s attention is first drawn to these possible future problems. (And there is probably an equivalent factor in many other countries.)

I believe there should be a major drive by governments to deal with this dangerous attitude which should place as much emphasis on risk insurance (life/disability) as savings and investments. Most governments’ current solution to death and disability problems for family circles – when no insurance is available – is social security, which is nearly always insufficient for the family and represents a huge unnecessary cost to the government.

The starting point for this attitude of encouraging and educating people to provide for future contingencies should be high school, so that students are aware they need to attend to such matters once they enter the workforce and adulthood. No young person would think of purchasing a car or home without insuring it. But when it comes to insuring their most valuable asset – their ability to earn income – it’s not even on their radar! Risk insurance should become as instinctive as car, house and health insurance.

Second, only a small minority of our population are sufficiently aware of the importance of protecting themselves and their family from the financial devastation resulting from a premature death which means that life insurance has to be sold. After attending a funeral, people do not walk off the street into a life insurance company and ask to buy life insurance because it has been on their to-do list for ages. When people get home from work at night after a hard day they don’t decide to forego dinner, switch off the TV or put reading material aside so they can sit down and philosophically ponder the question what if I had died last night? While most people know that they should address this issue, they just never get around to it!

From my earliest days in the industry, I saw the sale of life insurance as the opportunity to make a difference in people’s lives. How many occupations can you think of that allow you to leave home each morning knowing that, on that particular day, you could make a difference in the lives of the people with whom you come in contact?

Every time I delivered a death claim or disability claim cheque I knew that I had made a financial difference in the lives of the people or businesses that were the recipients of those cheques. This added meaning and value to my life, and provided dignity, financial stability and independence to the recipients of the cheques. But, left to themselves these people would not have instigated the process of purchasing these policies. I approached them. I took the initiative to convince them of the need to meet with me to hear how I could help them.

Third, even some practising Financial Advisers do not possess an unshakable belief in the benefits of life insurance and so do not see life insurance as the foundation of a wealth accumulation program! They would rather talk about what the prospect is more likely to be focused on, rather than what is important! They would rather talk about the high cost of living, rather than the high cost of dying!

Every wealth accumulation program takes time to achieve its target. However, if a person dies or becomes disabled during his or her accumulation stage, it is highly unlikely the target will be achieved.

Fourth, in addition I believe that the introduction of a government-regulated compliance regime into the financial services industry in Australia (and many other countries) over the last two decades has inadvertently added to the underinsurance problem.

In Australia, the introduction of compliance was aimed at moving the financial services industry from a product-driven to an advice-driven industry. A commendable purpose, but one which, in my opinion, has not been as successful as it could have been for a number of reasons.

I will expand on these reasons in more detail in chapter 1.

Finally, I believe there is a major flaw in the training process for new advisers entering the industry, despite their academic qualifications. Within the training process there is an over-emphasis on product and technical knowledge and a severe under-emphasis on communication skills, particularly in the area of empathy. No adviser fails in this business from lack of product knowledge!

There is a danger that many who are new to the industry may believe that the more qualifications an adviser possesses, the more successful they will become. I disagree! One could be the highest qualified person in the industry and starve to death at the same time because their education failed to include an ability to articulate one’s knowledge in such a manner that people will both understand and act upon.

HOW TO RESOLVE THE PROBLEM OF UNDERINSURANCE

I believe there are two major stumbling blocks preventing many advisers embracing the sale of risk insurance, and as a consequence impacting the problem of underinsurance.

In the first instance, some compliance, media and dealer group influences have promoted a mindset that selling and professionalism are mutually exclusive. In other words, if you sell for a living you cannot be regarded as professional. Conversely, if you want to be regarded as a professional you would not stoop so low as to sell for a living!

Surprisingly, this criticism has seen many experienced advisers become so convinced that selling is unprofessional they actually moved away from the insurance area and focused exclusively on the investment area, where they felt they would be more recognised as professional. This change of direction by them has further impacted the underinsurance problem.

I personally don’t believe that one’s professionalism is merely defined by occupation or the number of letters after one’s name. Rather, I believe that professionals are defined not by the business they are in, but by the way they are in business.

That has been my experience – that is also my belief.

Communication is an art, not a science. My observation over 40 years is that the top professional advisers are successful because of their persuasive talents. Through the exercise of those talents they encourage people to reach decisions that they know are best, but if left to their own deliberations they would prefer to procrastinate.

The second major stumbling block relates to the basics of selling insurance.

There are some Financial Advisers who genuinely feel uncomfortable giving risk insurance advice, either because they have not been exposed to proper training in the basics of selling risk insurance or prefer not to discuss the area of death or dying. As a consequence, they have chosen to either operate in areas where this is not a major consideration or they have reluctantly outsourced that particular part of the business.

THE IMPORTANCE OF THE BASICS

In 1956 I was introduced to the game of basketball. I fell in love with the game instantly and it was an obsession throughout my teenage years. I had the opportunity to play in the same team as State and Australian Olympic representatives. What an experience.

What I learned in those early years was the importance of the basics. I became a student of the game, spending countless hours on the court focusing on the basics until they became a natural part of my game. Those basics enabled me to play the game competitively and to a high standard through to age 40.

When I entered the financial services industry I became a student of the game through countless hours learning the basics, and I believe that throughout my career of 40 years this training helped me to become a successful Financial Adviser and mentor.

This book is about the basics of selling risk insurance, especially life insurance. It upsets me to think of anyone not owning life insurance. When I entered the industry in 1971 there was an underinsurance problem in our country – and 40 years later nothing has changed. I want to do something positive to help overcome this problem.

I want to use this book as an opportunity to pass on all the knowledge I acquired over my years as a practitioner. I would also hope that in time the book could become a life-long companion to the reader – something that will be kept within arm’s reach and drawn upon whenever needed to assist with a problem.

Some things never change – many of the selling skills I used in my 40th year were learned in my first year. I took every new idea I came across and Russell-ised it, until it became a natural part of my sales process. I invite my readers to do the same with any of my ideas that appeal to them.

In that first meeting with a new prospect, advisers get the chance to make the biggest sale of all – themselves! People buy people. They buy your advice first and your product last, and there is daylight in between!

Within the book, as I move from the preparation to the sale, the common denominator in each of the basics is communication, especially as it relates to:

•   The importance of preparation: How can you separate yourself from your competitors from the outset? In my opinion, you need to be well prepared, and my experience is that this is one of the most neglected areas of the fact-finding meeting training process. You should treat each meeting with a new prospect as a job interview – they’re interviewing you as a possible trusted adviser! Preparation is the key!

•   The fact-finding meeting: What do you say after you say hello? The primary purpose of this meeting is to build a relationship. How do you open the meeting in a positive manner, and close it in a way that will eliminate competition? You should have penetrating questions to ask that will help people clearly indicate to you their wants and needs, and enable you to give advice in that very first meeting that will clearly indicate your competence.

          In addition, these questions create multiple sales opportunities. There are many references to these types of questions throughout the book and appendices A and B.

•   The importance of the file note: I will explain how to design a file note summarising the meeting and forward the file note to the person for their comment and confirmation. The file note, in effect, acts as a pre-presentation document. I personally believe that my file notes were a major factor in closing my sales.

•   What to do with the information in the file note: We will look at the ability to dissect the information and develop a process for putting together the necessary strategies and recommendations.

•   How to assemble presentations: Learn Presentation Skills 101 which will lead to people saying yes to your recommendations and, as a consequence, your products. How to make the elusive closing rate of 10 out of 10 a reality.

•   How to make presentations: The importance of location, seating arrangements, visual aids and so on.

•   How to get the case through underwriting: Many applications, with your help, will be processed with no delays. Being able to gain cover for the difficult cases give you more personal satisfaction and opens the opportunity for referrals. Selling the insurance is the easy part; getting it through the underwriters is the hard part! We’ll examine how to sell medical loadings and exclusions.

•   Specific sales concepts for the employed-person market.

•   Business insurance – selling to the business owner: Estate planning, succession planning, keyperson and guarantor protection.

And much more, with applicable case studies to confirm my belief in simplifying the communication process from preparation to sale!

In summary, I am confident that by following and implementing my basics you will be able to build a solid foundation for any financial plan for your clients, should they live too long, die too soon, or become disabled along the way.

CHAPTER 1

THE IMPORTANCE OF PREPARATION

Preparation will make the dull person appear bright and the bright person appear brilliant.

Louis Nizer

In his excellent presentation at the 1980 Million Dollar Round Table (MDRT) meeting entitled Credit, Inflation, Cash Flow, Taxation and the Life Underwriter, the late Canadian David B. Cowper CLU opened his presentation with the above statement. Having always been a stickler for preparation, that statement caught my attention!

I had no idea who Louis Nizer was then, but in my enquiries found that he was a very successful American lawyer who wrote a best seller in 1962 called My Life in Court. At the time of the book’s release a journalist asked him why he was so successful in all of his court cases. His reply was very simple. Preparation, he said, and then went on to make the statement above.

I am of the opinion that one of the major stumbling blocks for new (and, surprisingly, even more experienced) Financial Advisers in conducting successful initial meetings with prospects (as well as review meetings with existing clients) is the lack of proper preparation. Preparation is a self-discipline that, in my opinion, separates the effective interviewer from the ineffective one.

In the early–mid ’90s, the Australian Government introduced a series of reforms which culminated as the Financial Services Reform Act in 2001 (FSR).

As mentioned in my Introduction, the main purpose behind this was to take the financial services industry from a product-driven industry to an advice-driven industry. To this end, the legislation strove to ensure that advisers focused more on their clients’ needs and objectives rather than on selling products.

TEMPLATED FACT FINDERS

For me one of the worst results of the FSR was the introduction by dealer groups of templated fact finders, to be used by their advisers in both initial and ongoing discussions with a prospect or client. I truly believe that this type of document came about based on a poor interpretation of the compliance regulations requiring identification of a client’s needs and objectives, and also to protect the dealer group.

By templated fact finders, I’m referring to a pre-printed document designed to gather information. Many of the documents I have reviewed run for 20-plus pages, and in most cases are multipurposed in that they cover several information-seeking areas including insurance, investments, superannuation and estate planning, which adds to their bulk. In addition, I believe that if people are initially meeting with a number of advisers before making a choice, they might quite easily get the impression that all advisers are singing from the same choir sheet! No point of differentiation!

The use of a templated fact finder throughout dealer groups has resulted in many advisers showing up for a meeting, opening up the fact finder document, and asking questions which are usually clinical in nature and devoid of any form of emotion. In my opinion this templated one-size-fits-all mentality has been one of the greatest barriers to effective communication and relationship building between client and adviser, and as a consequence has inadvertently contributed to the underinsurance problem in this country. This type of document takes no account of the individual character or skills of the adviser and totally overlooks the longstanding principle in any form of selling that people buy people.

In the financial services industry, people do not buy the fact finder or the dealer group – or for that matter, the life insurance company! They buy the integrity of the adviser. I can’t think of anything else that would be less likely to separate one adviser from his or her competitors than using a similarly worded fact finder.

My examination of numerous templated fact finders suggests that these documents were designed more to protect the dealer group against possible litigation somewhere down the track for incorrect advice, rather than to build relationships between the adviser and the prospect or client. It would seem that the fact-finding questions are usually designed by someone who has never been a practitioner but is aware of the compliance regulations. By designing the questions that their advisers could ask, dealer group management believe they can control or minimise information sought and advice given by the advisers under their authority, thus avoiding or reducing the possibility of litigation.

In addition, the templated fact finder enables the information recorded to be transferred to another templated document called a Statement of Advice, which records the actual advice given to a prospect or client.

The Statement of Advice, when finalised, is usually a very comprehensive document ranging from 20 to 90-plus pages, written in language which in the most part is not easily understood by the average person. This has been a constant negative in terms of the compliance regulations, particularly in the investment area. I will cover these problems more comprehensively in chapter 4.

The only advantage I see for both these templated documents is to create an easy-to-follow system which allows the dealer group to have random checks (audits) made of their advisers’ files. The auditor can quickly review both documents to see whether they meet the required fiduciary standards.

In summary, I believe compliance has made it more difficult for advisers to sell life insurance in particular, because its interpretation has inadvertently changed the way advisers interact with people, resulting in the sales process becoming more arduous. As a result, many experienced advisers have left the industry because they could not handle the transition, taking with them their unique conviction and passion, never to be replaced.

My research indicates that within industry training programs for new advisers post-FSR the emphasis on the fact-finding meeting appears to be too focused on gathering the facts and developing a very detailed knowledge on products and technical issues, rather than building a relationship. As a result, this type of training is teaching the new advisers to listen to the head.

Selling life insurance is not related to the head, but the heart! The head focuses on cost: can I afford it? The heart focuses on feelings for others: for example, a husband who loves his wife and children and wants to provide for their future financial security.

Selling life insurance is not a logical process. However, because of compliance requirements, today’s training has shifted from heart to knowledge. Thus new advisers – by focusing on gathering the facts – are missing out on the opportunity to build long-term relationships. They are not being trained to understand that the number one goal of each initial meeting should be to develop a relationship and, secondarily, to gather the facts!

IS THERE AN ALTERNATIVE TO TEMPLATED FACT FINDERS?

While I accept the dealer groups’ point of view regarding the necessity for uniformity in order to guard against litigation, I feel they neglect at their peril the opportunity to draft such a document in consultation with experienced Risk Insurance Financial Advisers within their dealer group.

I believe the present drafting process produces a document that adversely affects the Financial Advisers’ opportunity for developing initial relationships with people by listening to the heart.

The initial meeting with someone is more about understanding the potential client, knowing that it is the heart that thinks emotionally about (for example) one’s loved ones: I don’t want my family to suffer because of my lack of ability to plan in advance. In other words, the initial meeting is more about a heart thing than a factual thing.

Under the current dealer group system many Financial Advisers have no alternative but to use the mandated document. However, this should not prevent them from rethinking their strategy before their meetings in order to see how they can differentiate themselves from their competitors by focusing on the heart in order to build the relationship.

For example, I am aware of many advisers who have developed their own fact-finding line of questioning, and at the end of the initial meeting request a brief extension of time to gather additional information in order to meet with the dealer group’s compliance requirements.

ASKING GOOD QUESTIONS

So how does the Financial Adviser focus on the heart?

Simply by asking penetrating questions,