The real cost of leaning on products to help you sell
The following is based on one of The Covenant Group’s clients. All of the names and telling details have been changed.
I first met Walter Hornby a few months ago. A year earlier, Walter had left the bank where he’d been one of the leading investment advisors, to join a firm that promised opportunities for unlimited growth. But since making the move, Walter’s business had faltered; he’d been having trouble getting clients, and worse, had been losing existing clients. He was stymied by the sudden turn of events and determined to resurrect his business.
In our first meeting, I asked Walter to tell me more about his career.
In 2016, after working for years as an account manager, Walter jumped at the opportunity to become an investment advisor with the bank. After receiving intensive training on investments, the bank’s product portfolio and how to use a variety of sales tools, Walter set about selling funds to the bank’s current clientele. He was passionate about investments, the bank’s strong reputation and its solid fund performance and quickly became a star performer. The thrill of success eventually wore off as Walter grew frustrated with the compensation program and the limitations on what he could offer his clients. Plus, he wanted to start working with wealthier individuals and felt that he was better off doing that in an organization that offered greater freedom and an open product line.
Walter joined a firm, but quickly found competition in the high-net-worth market fierce. He was proud of the detailed presentations he developed for his prospects but frustrated that many chose to go with other solutions. Walter had seen some of the plans his competitors had put together, and felt his were far superior.“Walter,” I said, “you said something I find revealing. You referred to clients choosing other solutions over yours.”
Walter shrugged.
“You didn’t say that you lost business to other advisors . . .. Walter,” I said, “in Mega-Selling, David Cowper describes the time he went to see a wealthy prospect looking for $500,000 of insurance. When Mr. Cowper walked into the prospect’s office he noticed a stack of proposals on the desk and asked the prospect what he planned to do with it. The prospect answered he was going to look through them for the best company; to which Mr. Cowper replied, ‘You’re better off with the best agent with the worst company than with the worst agent with the best company.’”
Walter nodded. I sensed that he was beginning to understand.
“Mr. Cowper’s response crystallizes the problem of taking a product-focus in your business. We often hear about the perils of putting product first, but too many advisors aren’t aware they’re still doing it, and too many don’t understand the consequences.”
I told Walter that he suffered from a product-centred approach. “When we’re face-to-face with a prospect, it’s very tempting to lean on the reputation of our products, especially if the products are market leaders. Unfortunately, the client’s primary concern is with us, not our products. Mr. Cowper’s response addressed this issue head on and instantly separated him from the pack of product-pushers.”
Walter nodded and then asked, “But surely you’re going to lose clients if you sell them a poor performing product, even if you’re the best advisor.”
“That’s a trap a lot of advisors fall into,” I said. “Many heads of large organizations make this same costly mistake. Lots of financial services organizations have essentially a product-focus strategy. They believe they are going to build market share by focusing on establishing strong product brands and that their clients are going to stick with those brands. But this kind of strategy is folly.
“Product comparisons might sometimes seem to work, but only when you’re comparing apples-to-oranges. All products perform under the same market realities, and when you compare apples-to-apples all products are essentially the same. The other reality is that as soon as you come out with a new product, your competitors will also have it, sometimes within days.
“Product-focused or brand-building strategies simply don’t work. Frederick Reichheld, author of The Loyalty Effect, tells us that US corporations lose half their customers every five years. That’s staggering and financial services organizations aren’t immune to this effect. Recently James Langton in Investment Executive reported on a study done by Chicago-based investment research firm Spectrem Group, that says ‘When choosing an advisor, affluent households first look at the name and reputation of the advisor, rather than the name of the company the advisor works for.’ And that ‘High net-worth investors are moving away from traditional loyalties to financial institutions and aligning themselves with advisors and open architecture platforms on which they manage their finances.’
“The Spectrem report is absolutely the best news for advisors. It points to the growing importance of your role. Your clients are saying they can’t do without you. The winning strategy for financial services organizations isn’t to blow their brains out on product but to help their advisors develop sustained client relationships. They need to train their advisors not to try to beat the competition on product, but to beat them on finding the right solution to the prospect’s problem. And the right solution might mean utilizing a wide array of products, including products from various organizations.
“As an advisor, your competitive advantage lies in your ability to get to the root of your prospect’s problems and develop expert solutions. When you establish a reputation for your own expertise, you will find it much easier to build a clientele.
“A relationship-focused strategy, as opposed to a product-focused strategy, is also the best preventative medicine against losing clients. When a client calls their advisor to complain about the performance of their product, what are they really doing? Are they questioning the product’s performance or the advisor’s performance? Let’s say someone calls because their high-tech fund dropped 70%. That’s a huge drop. But was it the right product for your client? We all know that tech funds are risky -- maybe the advisor misjudged the risk-tolerance of the client. When you have a relationship focus, you will develop solutions that suit your client -- in all contingencies.”
Walter then asked, “What about prospects that insist on product and price comparisons?”
“Relationships are a two-way street,” I said. “While you might be capable of developing deep client relationships, your client might not. Don’t waste your time with these prospects. Work within your ideal client profile.”
Walter asked me one last question in our first meeting, “How come my method seemed to work at the bank?”
“I can think of a number of reasons. At the bank, you were dealing with less affluent people who were already existing clients of the bank. You bought a lot of credibility being part of the bank, felt comfortable there, and less threatened by competition. In this environment you probably didn’t lean on your products the way you did once you ventured out into the heavy competition of the high net-worth market. At the bank, you were out of your comfort zone, and less confident.”
Walter was enlivened by our discussion and eager to change his focus. We spent some time together developing Walter’s confidence so that he would resist the temptation to lean on his products. He began focusing more on the client, and digging deeper to understand them better and develop the right solutions. He soon became adept at establishing solid client relationships, which in turn gave him the confidence to sell himself and his reputation. The impact on his business was significant. By the end of his fiscal year, his annual revenue was twice what he’d made at the bank.
Lessons Learned
Walter learned the hard way why leaning on products to make a sale is a losing strategy. Clients express loyalty to their advisors, not the products they buy. This means that the real sale happens when you sell yourself to your client. All product sales are temporary and totally dependent on the continuing relationship between client and advisor. Walter learned that he was the interface between his supplier organizations and the client, and that he was fortunate to have aligned himself with a firm that offered various supports for a relationship focus. The firm offered an open architecture platform that gave Walter’s clients access to a wide variety of product solutions. The firm also supported Walter’s enrollment in programs such as ours that helped develop Walter’s ability to create and manage lasting client relationships. The firm wins by focusing on Walter, rather than the product; and Walter wins by focusing on his clients, rather than the product. As an advisor you are greater than your products and you have the ability, through your client relationships, to extend the average half-life of a client from five years to life.
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The Covenant Group is referred to by many as the place entrepreneurs go to become Business Builders. They are considered to be thought leaders and have authored the best-selling books, The 8 Best Practices of High- Performing Salespeople, The Entrepreneurial Journey, and The Business Builder.