The Importance of Discussing Goals, Expectations and Risk

Delbar’s 20th annual Quantitative Analysis of Investor Behavior Report came out earlier this year. As always, it’s a revealing portrait not only into core statistics of mainstream investors, but also into the foolish mindset of most investors.

For those who haven’t heard of it, Delbar’s annual report uses mutual fund sales, redemption’s and exchanges each month as the measure of average investor’s behavior. Those figures are compared with average investor return for various periods of time.

The PDF of the entire report can be downloaded here for free. Give it a read. It’s loaded with great information and insight.

Such as this nugget from page 3. It shows what investors actually get (1.85%) versus what the market indexes returned in the past 20 years (11.11% from S&P Index, 7.67% from Barclays Bond Index).

Numbers like that prove that it’s hardly worth the risk. Truth is, the stock market is wildly volatile and will continue to be.

But the most powerful paragraph in the report is one page 3. Candidly written, the Delbar report sheds pretense and cuts to the core of the best way to change mindless and foolish investor behavior.

“Attempts to correct irrational investor behavior through education have proved to be futile. The belief that investors will make prudent decisions after education and disclosure has been totally discredited. Instead of teaching, financial professionals should look to implement practices that influence the investor’s focus and expectations in ways that lead to more prudent investment decisions.”

The report doesn’t stop there. It goes on to say exactly how you can influence the investor’s focus and expectations so they will make more prudent decisions.

“An effective way to quantify capital preservation is to provide the investor with the likelihood of achieving their goal. Investors will understand the varying probabilities that come with a high or lesser degree of capital preservation.”

In other words: Talk about their specific goals. Talk about risks. Talk about reasonable expectations.

With that in mind, here is a simple insurance sales tip that will seamlessly and comfortably transition your talk about goals, risks and expectations into a possible sales close.

After asking your prospect several introductory questions, begin asking questions to which the answers lead into your products.

For example, after asking a few questions about the prospect’s family, a natural follow-up question would be: “How can I help you protect (names) both now and 20 years from now?”

Another example, after asking them about what their biggest concerns are, a strategic follow-up question is: “What do you think is the best solution to this problem?” Another is: “What do you think is a reasonable price to fix this problem?”

Another example, assuming you already know what kind of insurance came in to talk about, ask the prospect, “Would you like to me show you some of the key features and benefits of this plan?”

Finally, there is this question. Would you like to see our line of products according to price or according to benefits?

That last question forces a prospect to show their hand, even slightly. And it will help you gauge what’s driving their

The biggest mistakes you can make are telling them what their goals and expectations are and then telling them what you think they want.

As the Delbar report points out, attempts to educate investors have proven futile. This approach allows them to feel like they are in control but greatly reduces the chances of them acting imprudently and impulsively – the death knell for any long-term investment.
Be valuable.

Managing Editor,

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Brian J. Kay, Executive Director, Leads4Insurance
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