Advice and relationship first – product last

Unlike investment advice, risk advice is sold, not bought. But selling risk, according toAssociated Planners’ Russell Collins, is 95 per cent people knowledge and only 5 per cent technical knowledge — although he adds the caveat that advisers had better have 100 per cent knowledge of that 5 per cent.

Speaking at the recentAssociation of Financial Advisers(AFA) conference in Queensland, Collins said to be successful at risk advising, advisers need to understand that it is fundamentally a relationship business.

“There is a difference between transaction selling, which is about product, versus relationship selling, which is about relationships,” he said.

“The regulators have failed because they think people are selling product, not advice.”

Collins argued that clients will only buy risk products when they have a good relationship with the adviser.

It is therefore more a case of advisers selling themselves, rather than selling the products on offer. To do that, Collins said advisers must have an intimate knowledge of the products they are selling.

“When they know that you know what you’re talking about, the sale (of you) is made,” he said.

Risk advisers face very little threat from people wanting to do-it-themselves, according to Collins.

“An adviser can’t be replicated through technology and computers,” he said.

“Technology can tell people how to buy risk insurance and why they should buy risk insurance but it can’t make people want to buy risk insurance.”

On the touchy topic of commissions, Collins argued that clients won’t care about commissions if they feel they can trust their adviser.

“People pay for advice,” he said. “The level of commissions an adviser is paid depends on how well they communicate with people who don’t know anything about risk insurance.”

Collins presented a planned approach to risk selling that included preparing for fact-finding sessions.

The opening of the fact-finding interview was crucial.

“Get down to business as soon as possible — but also make the relationship enjoyable.”

Collins said that while the adviser should ask penetrating questions, they should also keep it simple.

Collins further warned advisers to make sure clients really understood what had taken place by signing off on file notes.

“Getting clients to sign a confirmation of file notes means that they will not argue with what it contains,” he said.

Collins said advisers should anticipate that a client might ask to run the insurance proposal past their accountant and should prepare some responses to that request.

“Ask if there will be anyone else who should be part of the decision-making process at the meeting,” he said.

To deal with possible objections relating to the affordability of premiums, Collins advised, “Get specific budget allocations worked out so that this can’t be an objection”.