Six Trust Building Strategies for Life Insurance Agents

Trust doesn’t just happen. You can’t create it with a snappy call to action or a clever objection response. It’s something you have to earn daily through your words and actions. For this reason, building trust requires a deliberate, multi-faceted strategy, nurtured steadily over months and years. What goes into this effort? Five powerful trust-building tactics, ending with an E&O insurance kicker.

Adhere to Five Ethical Practices to Instill Trust

It’s hard to deny that contemporary selling depends less these days on product appeals and hard persuasion techniques and more on information sharing and low-pressure counseling. This is especially true with Millennial clients, the industry’s prime target market now that Baby Boomers are retiring in great numbers. The last thing such prospects want is a life insurance agent launching aggressive sales salvos at them. Instead, they want to collaborate with their agents to solve problems. For this reason, ethical sales practices are an absolute requirement for creating trust with such buyers. Here are five essential ways to accelerate this process, especially with younger prospects.

1. Commit yourself to total credibility throughout the sales process. In today’s environment, it’s important to avoid misleading statements or exaggerations. This means you should avoid dubious claims and support your statements with third-party, objective evidence. In short, your words and actions must always be 100 percent beyond reproach.

2. Be completely reliable in terms of the promises you make. Put yourself in your clients’ shoes. How will they feel when their life insurance agent fails to return calls, to complete the research he committed to, or forgets to execute a requested service transaction? Disappointed is probably an understatement. Frankly, it won’t take many dashed promises for them to lose all faith. Lacking faith, they will be more likely to defect to a competitor. Solution? Sweat the small stuff, so clients can count on you every time.

3. Become client focused, not self-focused. We all know how much fun it is to speak and how boring it can be to listen to others. But listening to your clients is crucial if you want to establish long-term trust. It’s the only way you’ll really understand their fears, problems, objectives, and constraints. But listening is just the starting point. You have to commit to becoming a “high-touch” agent, staying in close contact, especially when markets are volatile. Finally, being client-focused hinges on you safeguarding their personal information, documents, and confidences. Never sharing client details with a colleague, family member, or friend will accelerate the trust-building process.

4. Commit to total transparency both during and after the sales process. The more information you convey about yourself and your firm, above and beyond the required disclosures, the quicker you’ll attain trusted-advisor status. To this end, encourage prospects to check you out using third-party sources such as FINRA’s BrokerCheck, the Better Business Bureau, and the National Ethics Association (sponsor of EOforLess).

5. Adopt a fiduciary mindset. Even if you are not legally required to act as a fiduciary, consider acting as one anyway. When prospects and clients see you are putting their needs ahead of your own, that you place ethics above self-dealing, they will come to trust you implicitly.

Position Yourself as a Responsible Life Insurance Agent

In addition to the above steps, strive to demonstrate you are a responsible financial professional. In others words, show prospects that your business practices are reasonable and that if you make a mistake or fail to do something important, you will make things right.

Start by discussing how you do business—that your recommendations derive from rigorous fact-finding and that all the financial products (and companies) you recommend have been rigorously vetted. What’s more, convey that everything you do on their behalf is mainstream and that your operations and procedures are bulletproof, especially when it comes to data security.

Then make a point of saying that you practice what you preach as a life insurance agent. Not only do you help your clients mitigate their financial risks through sound planning, you also do the same for your own business. This means you have financial backstops in place in case a financial-product company fails, a client gets hurt while visiting your office, or you make an error that financially harms a client. These protections take the form of SIPC insurance on securities purchases, state insurance guarantee funds for life policies and annuities, commercial general liability insurance (CGL) for office visitors, and E&O insurance for your professional mistakes and omissions.

Now here comes the kicker. Having E&O insurance from EOforLess may well be the most important element of all. Not only does it give clients peace of mind, it frees you to do your best work. In other words, E&O insurance coverage helps you  focus exclusively on your work rather than always second-guessing whether a recommendation exposes you to professional liability.

At the end of the day, building trusting client relationships will accelerate your success in the life insurance industry and help you to achieve your long-term financial objectives. If this doesn’t create peace of mind for you and your family, what will?

Would you prefer to spend time and money on growing your business or on protecting it? We thought so. And that’s because it’s human nature to focus on positive things and to avoid dealing with problems.

Yet preventing bad outcomes from harming your business can have as large a beneficial impact as launching a shiny new marketing program or buying new computer equipment or furniture.

In fact, spending money on E&O insurance may spell the difference between your company surviving a nasty client lawsuit or succumbing to it. But if you fail to buy E&O insurance and get sued, you’ll have the aggravation of hiring and paying for your own attorney and then paying for any settlements or judgments out of pocket.

So how to best avoid E&O lawsuits? By scrubbing your sales process of high-risk behaviors. This checklist shows you where to focus your mitigation efforts.

  • Only purchase sales leads from marketing firms that use compliant practices.
  • Properly identify yourself and your products in all pre-approach solicitations.
  • Conduct comprehensive fact-finding with all prospects.
  • Use a valid profiling instrument to understand your clients’ appetite for risk.
  • Only recommend suitable insurance and investment products to clients.
  • Never misrepresent the features, benefits, fees, or penalties of a recommended product.
  • Make sure clients understand what they’re buying, both at the time of sale and at policy delivery.
  • Review every client’s changing personal circumstances on an annual basis.
  • Execute all client service requests as quickly as possible.
  • Don’t disappear during times of market volatility; make yourself available to reassure nervous clients.
  • Establish reasonable expectations regarding the benefits of owning an insurance or investment product.
  • Document in writing when a client decides not to follow one of your recommendations.
  • Build a relationship with your clients’ children so they understand the nature of the work you do with their parents.
  • Memorialize in the client file all key plans and implementation steps.
  • Stay within your area of expertise; refer “outside” product sales to highly skilled third parties.
  • Do your own due diligence on product or insurance/investment firms before recommending them to clients.
  • Standardize your office policies and procedures, train your staff on them, and have printed copies on file.
  • Have a process for documenting and responding to client complaints.
  • Stay on top of regulatory and rule changes affecting your business.
  • Adopt a defense posture in every facet of your business; try to anticipate problems and eliminate risks whenever possible.

Fiduciary Standard Refuses to Die; Should You Modify Your Sales Practices in 2018?

Many in the financial-services industry assumed that the election of Donald Trump as president in November 2016 would spell the end of the Department of Labor’s recently enacted Fiduciary Rule. And in part, they were right, since the agency has put important parts of the standard on hold until July 2019.

Despite this, the movement toward a uniform fiduciary standard apparently continues along three fronts: state securities departments, the Securities and Exchange Commission (SEC), and state insurance commissioners. Whether these efforts reinforce each other or produce a uniform standard is anyone’s guess. But it’s becoming clear that putting client interests first is becoming a core financial-services sales practice that may be difficult to water down. If you are an insurance agent or securities broker, 2018 may be the year to adopt a fiduciary orientation even though you aren’t legally required to do so.

One impetus for this is a movement among state securities administrations to require broker-dealers to uphold a fiduciary standard when recommending investment products. States such as Nevada took this position after they saw the federal government back away from the DOL standard after years of rule making. In April 2017, the Nevada securities department passed a law that expanded which financial professionals will be held to a fiduciary standard. Before April, only so-called “financial planners” were.

After the bill was enacted, broker-dealers and registered investment advisors were subject to the standard, as well. Nevada joined four other states that now require broker-dealers to operate as fiduciaries (through case law, not statute). These include California, Missouri, South Carolina, and South Dakota. An additional three states are currently developing fiduciary rules: New York, New Jersey, and Massachusetts.

The second impetus is that the SEC has announced it will be developing its own fiduciary standard, which may harmonize with the rule revision in process at the Department of Labor. This rule will not be confined to investment advisors in the retirement marketplace. It presumably will cover any entity providing investment advice and products in all contexts, not just retirement.

The third impetus is underway at the National Association of Insurance Commissioners, which guides individual insurance departments on the development of insurance statues. Its Life Insurance and Annuities Committee is now working on revising its Suitability in Annuity Transactions Model Regulation. One potential addition will be adding a best-interest standard to all agents selling annuities.

The current annuity suitability model law was approved in 2010 and is now in effect in 39 states and the District of Columbia. However, after members of the Annuity Suitability Working Group learned that President Trump intended to delay implementation of the DOL’s fiduciary rule, it decided to add a best-interests component to the annuity model law.

Broadly speaking, this would require life insurance agents to verify that the annuities they sell meet the needs of their clients. Based on language now being considered, they would have to “at the time the annuity is issued (act) with reasonable diligence, care, skill, and prudence in a manner that puts the interest of the consumer first and foremost.”

The draft rule revision would not require agents to sell annuities with the lowest possible commissions or the highest possible stated interest rates. However, it would prohibit agents from receiving “more than reasonable cash compensation.  In a potentially explosive move, the measure will require agents to disclose their annuity commissions if they exceed a three percent threshold.

As these regulatory strands wind together over the coming year, how should financial professionals respond? Conservatively, says the National Ethics Association, sponsor of EOforLess. Even if you don’t sell annuities or other retirement products, it’s advisable to comply with the DOL’s best-interest standard, which went into effect this year. This involves always:

• Giving one’s clients advice that serves their best interests.
• Charging only “reasonable” compensation.
• Never making misleading statements.

Keeping your client’s best interests in mind at all times not only should keep you out of regulatory hot water in 2018, it should also help you to avoid damaging E&O insurance disputes. Bottom line: until the DOL, SEC, and state securities and insurance administrators determine their respective fiduciary postures, make sure your sales practices always align with the interests of your clients. As long as you’re sitting on the same side of the table as your customers, you should be fine wherever the regulators land.

Technology has reshaped almost every aspect of insurance and financial sales. From the advent of the personal computer and spreadsheet software to the rise of the Web and mobile technology, it has become easier and more efficient to run a financial-services business today than at any time in the past.

However, sometimes the development of new technology raises more questions than it answers. That’s the case with facial expression software, which financial firms are using to uncover people’s emotions about money. Does this new application make traditional fact-finding more revealing and productive? Or does it undermine the financial advisor/client relationship . . . perhaps jeopardizing advisors’ standing in the industry of tomorrow?

One cause for concern: facial recognition software is entering a finance domain that until now has been old school—needs assessments. Until recently, this process has been human-directed. Flesh-and-blood advisors typically sit down in actual rooms and ask real customers questions to identify their financial needs and concerns. The best advisors are skilled at detecting client worries, both through their words and body language. They’re also adept at asking probing questions to clarify when words and and posture conflict.

In fact, the entire industry depends on thousands of financial advisors sitting across from prospects and clients, asking questions and encouraging clients to reveal their concerns. Problem is, the field of behavioral economics has poked holes in this methodology. In repeated studies, it has shown that clients have trouble making rational money decisions. More often, emotional and cognitive errors cloud their thoughts, leading them to make sub-optimal decisions. And the traditional fact-finding interview may not help advisors much, since emotional and cognitive errors may not be visible to the naked eye.

Making matters worse, sometimes clients hide their emotions when meeting with their advisors, either deliberately or unconsciously. This leads advisors to make off-the-mark recommendations that end up poorly serving their clients.

What if there were a way to better assess client emotions prior to making recommendations? If software could deliver that, would you use it? The financial professionals at independent advisory firm Cetera Financial Group are answering that question now. Their firm has introduced a new software program designed to analyze a client’s facial expressions during fact-finding meetings. The goal: to shine a light on people’s money emotions in order to build a deeper relationship between them and their advisors.

How does it work? Cetera’s Decipher application runs on any device that has a web camera. The financial advisor simply asks clients to watch a series of videos about financial scenarios. The software then maps minute changes in their facial expressions to reveal their underlying emotions toward money.

“Decipher is transformative for the advice industry,” says Robert Moore, CEO, Cetera Financial Group. “It takes the relationship with the advisor to the next level. A lot of information is conveyed non-verbally. This is a tool for relationship building that will help the advisor really know what is in the best interests of the client.” A side benefit is that it will make the entire investment recommendation process more transparent and compliant with the Department of Labor’s Fiduciary Rule.

Moore adds that the program will be available to any advisor and client who’d like to use it. Plus, it will not be used to create financial plans. Instead, its function will be to increase an advisor’s understanding of a client’s perceived problems. And he says the company may eventually integrate Decipher into its online risk profiling application, giving a future automated investment platform greater ability to retain client assets during times of market volatility.

Although Moore says Decipher will not replace advisors, it’s not hard to envision a scenario in which the software might decrease the advisor’s role during fact-finding. It’s possible Decipher may prove to be more efficient than a human advisor at detecting emotions. And how will advisors react to partnering with a computer? Will they assume the software is smarter than they and defer to it? Or will they stubbornly rely on their own instincts even when the computer says otherwise?

Another implication: how will clients react to interacting with a computer instead of a human advisor? Will they be comfortable with a machine “reading” their deepest emotions? Will they buy it when the computer says they’re feeling something they don’t believe they’re feeling? Or will they make an issue out of it, thereby derailing the sales process?

Finally, how will all concerned react to automating what used to be the living, beating heart of financial planning—the advisor/client needs discussion? Will people view the transference of part of this process to a computer as a good or bad thing? And ultimately, if the technology catches on at other firms, will it actually help clients and advisors build stronger relationships or will it undermine them? Only time will

To read on ethical business practices, visit the Ethics Center at the National Ethics Association, sponsor of EOforLess.