When asked whether fear or greed was the stronger human motivator, famed investor Warren Buffet answered unequivocally: “There is no comparison between fear and greed. Greed is slower. Fear is instant, pervasive, and intense.”
No wonder many agents use fear to close sales. And why not? Consumers should be afraid of running out of money in retirement or leaving their spouse penniless when they die. By making fear explicit, advisors help clients take needed steps to enhance their financial security.
But here’s the problem. Many agents also spread lies about Social Security, Medicare, or FDIC insurance in order to move prospects from CDs into annuities. This increases the odds of consumers coming down with buyer’s remorse or filing an insurance-department complaint.
Here are three common misrepresentations used by fear-mongering agents.
Misrepresentation No. 1: The most a consumer can have insured is $250,000.
Fact: The $250,000 FDIC limit is per insured bank, for each account type. So, consumers can have more than $250,000 in protection if they have multiple account types in several banks.
Misrepresentation No. 2: If a bank fails, the FDIC could take up to 99 years to reimburse depositors.
Fact: Federal law requires the FDIC to remit the insured’s deposits “as soon as possible” after an insured bank fails. This usually happens within a few days, not years.
Misrepresentation No. 3: The FDIC only pays a fixed amount per dollar in each insured account.
Fact: Federal law requires the FDIC to pay 100 percent of insured deposits, up to the federal limit, including principal and interest.
The problem with fear mongering? It’s an anemic sales tactic and the lowest form of selling. Highlighting the benefits of a product makes customers really want to buy. People who buy out of fear feel they have been forced to buy. When weak agents resort to this tactic, their sales lack depth and staying power, often resulting in buyer’s remorse and potential errors-and-omissions problems.
Think about it. What happens when an advisor lies to a prospect about the FDIC (or another government program)? The prospect is overcome with fear and forgets about the benefits of the product. So he goes to the bank to withdraw the money, but can’t defend his purchase to the bank customer service rep. Then he learns from the rep that everything the advisor told him about the FDIC was wrong. Whoops. Goodbye sale, so long credibility, see you later reputation.
Even worse, prospects who are coerced into buying often come down with buyer’s remorse and back out under the policy’s 10-day free-look provision. Or if they don’t back out, their discontent builds until they ultimately file a complaint about their agent. You may have errors-and-omissions insurance, but who needs this headache?
Wouldn’t you rather be an advisor who sells from a position of strength? Here’s how to become one:
- Use fear constructively in order to assess and neutralize legitimate risks.
- Never make false statements about government benefits just to make a sale. It’s unethical, inhumane, and wrong.
- Instead, become an expert on government programs so you can proactively educate clients about the program’s weaknesses and help them take protective steps.
Finally, don’t just position yourself for your next sale. Do what’s required to survive long-term in this business. Sell truthfully!
For more information on reducing your errors-and-omissions insurance risks, visit National Ethics Association’s E&O Headquarters at EOforLess.com.
