Some people might wonder if the middle market is really a niche. After all, there’s the top 20 percent of affluent clients, and there’s everyone else. But that’s exactly why the middle market can be so lucrative: There’s more room to maneuver when you’re not knocking on the same affluent doors as every other financial advisor.
Plus, there are lots of people out there who need your services and don’t even know you’re there for them. If they know of you, they may think they can’t afford you. “Quite often, they have the misconception that they can’t afford our products or that financial planning is only for that wealthier segment,” says Shane Fisher, FICF, a sales manager with Foresters Financial Partners in Idaho Falls, Idaho. “Don’t tell the clients what they need; ask them what they want. After they answer that, you can educate them as to how you can help them reach their goals.”
Clients often don’t understand the role of protection in keeping their dreams alive.
Teach them well
This NAIFA-Eastern Idaho member and former teacher has direct experience with helping middle-market families understand the foundation of a solid financial plan: Start by having them identify their goals, which are often centered on retirement or saving for their kids’ education.
Educating your clients is so important because they often don’t understand the role of protection in keeping their retirement and education dreams alive. For Fisher, these goals are higher up on the financial health pyramid—the base of which, he explains, is the protection component. “For the middle market, if the earning potential disappears, the whole plan falls apart—including retirement and college,” Fisher says.
Find the best solution
Middle-market families tend to have multiple needs. In addition to their retirement and college planning, they often don’t have enough savings for an emergency fund. The prospect of losing their income can be terrifying, but so is the idea of juggling several policies to meet their myriad needs, says Fisher. “If you tell your clients they need a disability income policy, a critical illness policy, a life insurance policy and whatever other policies they need, it will overwhelm them,” he explains. “But if you say, ‘You can have one payment, one policy for all these situations,’ it simplifies things for them.”
Show them the money
Middle-market clients often think they can’t afford protection. Your unique opportunity here is to show them how they can. “It can be something as simple as how often they go to dinner,” says Fisher. “Say they go out to dinner once a week, and it averages $50. You can show them that by sacrificing one dinner a month, you can put a policy in place that will protect their family if a tragic event occurs.”
Often, “we can’t afford it” is shorthand for “we don’t have a budget.” The middle market doesn’t need wealth-management techniques as much as it does money-management skills. “Sometimes it’s a matter of helping them learn how to work within a budget,” Fisher says. “It’s so enlightening for them when they go from being afraid that they don’t have enough money or scraping by from month to month to realizing that they actually have a significant surplus every month.”
Finally, don’t toss everything at them at once, no matter how wonderful a combination product you find. “If I come to you and explain that I’m going to put a life insurance plan in place, as well as mutual funds for retirement and college planning, and it will be $250 a month, you’ll choke on that number,” says Fisher. Instead, he recommends building the pyramid over the course of a year to a year-and-a-half, starting with life insurance as the base. “They don’t even notice that they’re paying the premium,” he adds. “Once they get used to the price of building the base, you can [encourage them to] move on to the other planning they want to do.”