Wednesday, September 25, 2019

How should FAs sell their insurance products ?

Image result for flip the script

First of all, calm the fuck down.

[ Note that this post was removed from the Seedly discussion group because of my use of the four lettered word. Moderators wrote to me to explain their stance. There is no hard feelings but this reflects how much FAs fear articles like this on the web. They rather censor me than debate earnestly on this topic. Do spread it around because the context behind my use of 'fuck' is not meant as a cuss word. ]

I'm not here to bash Financial Advisors today.

I am teaching myself how to sell better and thought the best way would be to get to the level that I can teach someone so that I can become an ace salesman myself. Also, Dr Wealth sales staff are fans of my blog and I want to give them a little bit of training of my own.

I think there is nothing better than to demonstrate to FAs how to sell better to level up my own skills as a sales person. As it turns out, the old formula of introducing the product, acting exceedingly fake and optimistic about it, trying to close and then working super hard to deal with objections, is a thing of the past. As consumers, we know that you will employ these Jedi mind tricks on us and this explains why the internet is full of negative press about financial advisors.

Instead int he book Flip the Script by Oren Klaff, a much better model is proposed.

I think if an FA were to follow this script, they can do much better.

[ Note that I am not qualified as an Financial Advisor and the dialogue serves to demonstrate a sample sale and should not be taken as investment or insurance advice * Wink * * Wink * ]

Oren calls this the Buyer's Formula :

a) Introduce the buyer's formula

The trick is not to sell any product, but to sell a buyer's formula. Unfortunately, this formula has to come from a position of sincerity and earnestness. I will demonstrate my Buyer's formula for term life : "Look, a lot of students I have overpay for insurance. The quickest way around this is to find a mix of products that produces the lowest commissions for insurance sales personnel. This means hunting for a range of products that they will NOT SELL to you."

Now I got your attention, I'm not a just another fly-by-night FA.

b) Outline obvious ways to fail.

" Look at ILPs being peddled by FAs. They are obvious commissions generators. I know someone who is aged 60 and he tells me that he pays so much for his mortality credits for his ILP, his investments no longer increase in value after he pays his premiums. Also his ISP's with a Class Ward A has just gone up in premiums again. And critical illness is just a lottery ticket that pays when you get cancer.  That's no fun if you are at the age where you can't work anymore ! "

This is not only believable. This can be true. More interestingly you are an FA who seems not to be interested in pushing expensive products to the buyer. Intriguing.

c) Highlight Counterintuitive ways to fail.

"I'm all for buy-term-and-invest-the-rest and I can process your term insurance purchase right now if you wish, but the problem with term life is that it may not cover the case where you have some accident or mental illness and can't perform your task. I have disability income insurance and I bet no other FA has ever tried to sell to you before."

You highlight the small flaws for strategies that investors employ like BTIR but support it along so that I can find a genuinely good product to complement it - Disability Income insurance.

d) List Obvious Actions

" The trick would be to buy insurance without an investing component but figure out how to invest for a better future. Investors need a different kind of insurance plan : a cheap accident policy, a minimalist hospitalisation and surgical plan of up to B1 ward, and this disability income insurance. You can do all this with your term life for less than $300 per month if you already have AVIVA Group Term Life. You can focus the rest of your income on dividends stocks."

e) Less Obvious Hacks.

" Oh yes, you're probably smart enough to create a REIT portfolio on your own. At 6% yields, this insurance is free if you have a $60,000 REIT portfolio. A good investor should never pay for insurance from his earned income ! "

Genius ! Who thinks of shit like that ?

f) Hand over Autonomy

" Look, you are already a dividends investor, I can't really tell you what you should buy but I've done this hundreds of times with other clients and they are really happy with this combination of insurance products. "

Modern buyers don't like to be told about how to run their financial lives by Financial Advisors. This pisses me off. If you hand over autonomy to me, I am actually more plaint to future requests.

g) Redirect to keep buyer in bound.

" Yes, the combination may not pay out too well if you get cancer because there is no Critical Illness insurance, but that's what your investment portfolio is designed to do. Your investment portfolio will cover contingencies not covered by insurance such as getting retrenched, kids going to university,  or that stupid cousin wants money to open a coffee stall. "

Just let the customer object and get their satisfaction. You don't have to deal with every objection aggressively.

I'd like FAs to seriously consider using this gentler sales approach to earn their money, it requires a more intimate understanding of the customer and an honest assessment of products you can sell to make the world a better place. Maybe over the long term, you may earn lower commissions per sale but you can make it up with stronger volume coming from better referrals.

Another way of looking at this is that competing FA reading this will try out my script and actually starts getting sales from it - can you risk ignoring this different approach used by your competition ?


  1. Actual case: a recent high profile case got insurance payouts of a few million dollars. No, the family is not a millionaire family. Do you think they would be able to get such payout if the insured bought expensive wholelife, endowments or ILPs??

  2. In a word, yes.

    The majority of largest payout size..not looking at a small 1 mil, are whole life and universal life plans. Also variable univeral life plans, which are basically ILPs for rich pepple.

    So yes.

  3. The key phrase is "not a millionaire family".

    Backup your "yes" by suggesting wholelife or universal life plans of $2++M sum assured for 40+ year old @ less than $2K annual premium and zero initial payments???

    Btw, that actual case involved a veteran of the insurance industry. What better endorsement than an insurance insider dying & using plans that few insurance insiders will sell to clients??

    This is better than putting your money where your mouth is --- this is putting money where YOUR LIFE is! LOL!!!

  4. I'm more inclined to support Unknown's argument so far. Maybe I need to read up on universal life to understand how it works and how much commissions it pays.

    A lot of FAs are now talking about it.

  5. It doesnt matter if it is a term life, a universal life or a whole life plan. If the person who had debts of a few million dollars, his family might still be in debt. The question is if he spent so much in premiums he retired with enough retirement income or not. As far as I know, no one retires on insurance payouts. However, as a legacy tool, I'd say it does provide a via means only if there is affordability. A 99 term plan for age 38 is 3500 a year for 1 million, if you are able to sustain 3500 a year and do not live beyond 99, its an affordable tool. For Whole Life plans, premiums will be 3 to 4 times more, perhaps limited pay for 25 years but there is uncertainty in projected payout. Lastly, universal life oa a tool that is more for higher income earners, it usually requires a single pay and is non-participating such that payout is guaranteed. The plan has a crediting rate by the insurer such that it guarantees a minimum of 2% cash into the plan to pay part of the 'future' premiums. In good policies, there will be worst case scenario where they illustrate what happens if the insurer only credits the minimum and charges the maximum. I saw that at 82 to 88 years old, the owner may need to top up additional cash just to keep this plan afloat. However, those who buy this plans often feel the insurer will NOT fail them. In the case of HNW, they like to further 'win' by getting a bank to leverage for them. Basically this means getting additional cover with a loan. The bank lends you money to buy the UL and you only need to pay the bank the interest. In a way the policy is a collateral for the loan. As with all such plans, the risks for a HNW will always be lower than for the average earner because this is just one way they diversify where the rest of us will not be able to. Nothhing mysterious here.

  6. Colin,

    Thanks for shedding light on Universal Life.

    This is the big thing now that everyone need to be enlightened about right up to intelligence on commissions, etc...