Why It’s So Brutally Hard to Get Prospects to Move
October 28, 2014
by Dan Richards
At the end of my talks at conferences, I invite the audience to ask questions. After a talk last week, an advisor came up to me and said: “I only have one question. Why is it so incredibly, brutally, unbelievably hard to get prospects to move?”
I asked him to tell me more and he described a case where, over the past two years, he had three meetings with a successful business owner in his community … and still couldn’t get him to move.
Two factors underlie the difficulty in getting prospects to make a change – the risk of pain is too great or the prospect of gain is insufficient. The good news is that there are some strategies that can overcome these obstacles.
The power of inertia
On important decisions, people often tend to be resistant to change. That’s why incumbency can be such a big advantage – think about the high reelection rate among politicians and how difficult it has proven for challengers to defeat incumbent members of congress, senators and Presidents. There’s a reason for the expression “Politicians in power aren’t defeated, they defeat themselves.”
It’s hard to underestimate the power of inertia when it comes to displacing an existing financial advisor. Part of the reason is what economists call “friction costs” – the hassle and disruption of moving. But another is risk avoidance – researchers in behavioral finance have documented that investors weigh the risk of loss much more heavily than they do the prospect of gain. Many investors may not be entirely happy with their existing advisors, but at least they know that to expect – as opposed to embarking on a new relationship and exposing themselves to the risk of unpleasant surprises.
Here are two strategies to overcome inertia and address resistance to change:
- Reduce the hurdle for new clients to do business with you.A recent column discussed an advisor with an “all or nothing” mindset, Why Account Minimums Threaten Your Business, and how high minimums can be a barrier to new clients. A conversation with an advisor earlier this year was a case in point – he only works with clients who are prepared to move 100% of their assets over to him, based on the view that this is the only way he can provide integrated, tax effective solutions. While he’s an extreme instance, many advisors are rigid on their client minimums.
Contrast that with a different advisor I talked to after a conference talk. If prospects are interested and have sufficient assets overall but aren’t comfortable moving over enough to meet his minimum, provided that he likes them, he tells them that he is prepared to waive his minimum for the initial 12-month period, with the goal of demonstrating his value and earning their trust to the point that they’ll be prepared to move over sufficient additional assets to meet his threshold.
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