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Getting and Keeping Customers

You need to adopt a high-tech, high-touch approach if you want to attract new clients and successfully manage your existing customer base.

By Robert O’Connor

Financial advisors do not usually need to be sold on the importance of developing effective marketing and sales strategies. They have always understood the necessity of bringing in new business and keeping existing clients happy. Most also realize that the pressure to market themselves and their products is likely to intensify as the financial services industry changes.

The barriers that once separated various financial activities are disappearing, in large part as a result of the Financial Modernization Act of 1999. Mergers are creating huge corporate entities capable of operating across broad areas. New products are constantly being introduced into a market characterized by rapidly changing demographics. And advances in information technology are making it easier to attract and retain customers.

Doing business the old-fashioned way
However, technological advances have not completely changed the art of marketing. As John Berkowitz, president of Chicago-based health insurance broker medEquote, notes, new technology has not altered the fundamentals of marketing. “It’s not a whole new ballgame,” he says. “It’s a different way of taking orders. You still have to run it like a business. And you still have to make a profit.”

Berkowitz, who describes his firm as a “one-stop place to buy health insurance,” is optimistic about the marketing benefits of information technology. “I just spent $30,000 building a website where I can sell all over the country,” he says. MedEquote’s market includes small businesses and the self-employed. Berkowitz’ website will allow people to buy insurance online with the help of electronic signatures.

John Novi Sr., founder and CEO of Cosmat Insurance Company in Chicago, has a similar view. “On one end, a lot of things have changed because of technology. But the fundamentals haven’t changed in the last 50 years.”

These fundamentals consist of deciding on a product, selecting a niche in the market and designing a program that will reach the selected audience. “Pure common sense,” he says.

According to Novi, the best way to manage a client base is to provide good service. When customers have problems, they want to be able to “pick up the phone and talk to somebody who is alive-not to a machine.” Accordingly, he has banned the use of voice mail in his office. Cosmat is a successful health insurance business, providing individual and small-group coverage.

Using the internet to get the word out
The firm, Novi says, is one of the few in the country that has devised a successful direct-mail program for the insurance industry. Cosmat augments its direct-mail efforts with the Internet and its own website. Novi views new technology as a complement to existing methods. “The Internet is not going to really give you the sales,” he says. “However, if you’re going to use the Internet to supplement what you are already doing, you will get a tremendous result.”

The Internet provides instant communication in the form of email and expands a firm’s geographical base. “The Internet is like a baby who is growing,” Novi says. “And it will probably be another generation before there will be widespread usage.”

Novi believes that bureaucracy has limited the ability of insurance providers to react to the benefits the new technology offers and thinks that large companies may suffer from a lack of field experience.

The creation of new financial services markets will not come without some conflict. There is concern, for instance, that the huge conglomerates emerging through consolidation may make unacceptable use of the personal data they are amassing. Critics point out that an insurer that owns a credit card company, for example, might be able to monitor the tobacco and alcohol purchases of applicants for life insurance.

The Health Insurance Portability and Accountability Act has been designed to create some limits on the transfer of personal data.

The development of the Internet as a promotional vehicle has spawned a generation of specialists who can create websites and even advise businesses on the placement and distribution of Internet advertising. But financial advisors do not need experts to point out ways in which they can use the Web to gather valuable market information. They can start by using their imagination. Advisors can now profile potential clients at the touch of a button and learn quickly of business developments like the arrival of a new company in their area. Every advisor should develop a routine for gathering and assessing such data.

Terry Stanley, an independent authorized agent for Blue Cross/Blue Shield in Charlotte, N.C., says that the Internet has made it easier to get the message out. The market for Stanley’s health, life and group insurance is made up largely of small to medium-sized companies. While his two websites are paying for themselves, they are not generating a lot of activity. “But,” he observes, “I’m thinking more of the future.” The design of Stanley’s two sites was guided by Blue Cross/Blue Shield, which gave him a couple of options. His marketing is subject to approval by Blue Cross/Blue Shield.

The websites are generating two to three leads a week. He had expected more and is confident that traffic will increase as customers become more comfortable with doing business online. By contrast, he is getting three to four calls a day as a result of his listings in two Yellow Pages. He also gets a lot of business from referrals and no longer cold-calls or uses telemarketers. He has so much business coming in that he no longer has the need.

Staying in touch
Over the years, service providers have developed a wide range of tools to help advisors manage their clients. For instance,, a Los Angeles-based technology company, is offering an electronic, client-relationship management (ECRM) system, which allows an advisor to carry out research- and relationship-based selling and track a client’s needs without spending too much time and money in the process.

According to Howard Witkin,’s president, life and annuity sales are particularly dependent on regular contact between advisor and client.

But paying attention can be very expensive. A letter might cost $5 and because of the time involved, a telephone call might run as high as $15. ECRM relies on a series of software tools that can create rules to govern customer relationships. The advisor would be prompted, for instance, to call a client on day five and send a letter on day 10. Each month, a newsletter addressing a financial-planning issue would go out by email. The client would also receive a card on his birthday.

Witkin says that’s ECRM system allows for a 20-touch sequence in a year. Fifteen are in the form of electronic messages and are therefore free. Two are letters, costing about 50 cents each.

The cost of the birthday card is up to the advisor. Advisors can set their own priorities. Witkin, for instance, would want every high-net-worth customer to receive an email message in February, which would discuss tax-deferral strategies. While the system provides the prompts, it is up to the advisor to apply the intelligence.

Customer-management systems have obvious potential. Not only can they keep close tabs on clients, they can also track emerging products. They make mailings more efficient and enable advisors to conduct regular scans of client data to support possible approaches. And they can help advisors keep track of their appointments.

The Internet is also a valuable tool for “prepositioning” information in front of potential clients. “Consumers are desperate right now to do self-directed research,” Witkin says. “No one wants to look like an idiot. They want to understand what’s out there.”

The high-tech middleman
Technology is also helping advisors link up with clients. For example, Annuity. net puts would-be clients in touch with advisors via the Web, based on demographics and area codes. The company bills its advisors on a fee-for-service basis. Web users fill out forms online and the information is relayed within minutes to the relevant advisor. He can telephone the prospect knowing that there is a good chance of making a sale. Witkin reports an average 120-day close rate of 40 percent. “Those agents who are paying attention longer are seeing even higher close rates,” he points out.

He adds that the level of detail requested in the online form ensures that the respondents are serious. “We want to know who they are,” he says, “what they make, where they live and what they do for a living. On some of our more detailed forms, they are telling us who their beneficiaries should be, what their holdings are, what their savings are and what their tax savings are.”

As with other areas of attracting and maintaining customers, technology has not replaced the advisor. People still need personal guidance through a wide range of available options. “No one,” Witkin says, “just walks up and says, ‘Hey, I need a variable annuity.’ They have a financial-planning need. They have a tax-deferral need. They have an undefined need. They’re not quite sure where they are.”

His company’s approach is to give the consumer a research platform followed by a connection to the best possible professional who can provide the advice and make the sale. By the end of 2001, Witkin says, hopes to be processing 10,000 applications a month. He currently receives about five to 10 inquiries a day from advisors. “We have a waiting list because we just can’t review their credentials fast enough.”

It is crucial for an advisor to have a web presence if only to demonstrate that he has moved with the times. A website also provides contact with potential clients still in the research stage. “If the advisor isn’t on that playing field,” Witkin says, “he has a significant credibility issue. Even if only a small percentage of his business is finally coming from the web, he has to be able to tell his people: ‘I’m there. I’m working with it. I understand the technology.’”

Witkin will launch a tool that will allow an advisor to fill out an entire application online while talking to a consumer. The advisor will be able to post the application to his own website. The customer would then review the application, print it out, sign it and send it back.

Online referrals take off
Online-referral systems like those from are likely to become more popular with time. For instance, the National Association of Insurance and Financial Advisors has an online-referral service. And Hartford Financial Services has introduced a Personal Insurance Agency Locator to connect would-be clients with independent advisors in their areas. The agent, who does not pay for the service, is given two business days to respond to a customer query. If he does not reply, the information is passed to the next advisor. In a statement released when the system was launched in June, David H. Moore, an assistant vice president at the Simsbury, Conn.-based company, says that Hartford hopes to promote contact between customers and agents who represent Hartford. “Most consumers,” Moore adds, “appreciate the information and experience an agent brings to the sales process; so we want to make it easy to find and work with an agency.”

Meanwhile the group’s Hartford Life subsidiary offers online information to advisors about 401(k) plans. The website allows the advisors to monitor the status of their customers’ retirement programs. Hartford believes that this service will promote a variety of sales opportunities.

Personal touch is still a must
But even as the technology-based environment changes the way advisors work with their clients, old skills will continue to apply. Doug Veitch, a senior partner at Veitch Carnes & Associates, a financial services planning firm in Colorado Springs, Colo., puts his faith in the personal touch. “Insurance,” Veitch says, “is a concept. Insurance isn’t something that you say, ‘Yeah, that guy takes a size 40.’ And you go out and sell a size 40.”

The company works hard to maintain contact with its clients. It sends birthday and Christmas cards and responds to major events in people’s lives. This means reading the obituaries and birth notices and listening to clients. The company also has four or five dinner seminars through the winter to which clients are invited. Veitch or his partners fly to California once a month to meet with clients and the firm keeps in touch with military clients around the world by email.

“Is it expensive to maintain contact?” Veitch asks. “Absolutely. Is it necessary? You bet your career.”

He points out that the average client who goes to his firm for a financial makeover can be expected to make seven to eight large investments, in addition to a number of smaller ones, over the ensuing decade. He is determined that all of these transactions be with his firm. If his company is not taking care of all of the client’s needs, Veitch notes, the client has the right to go somewhere-and would be encouraged to do so.

He describes his firm’s market as “upper middle class, lower upper class,” with its clients’ annual incomes averaging from $80,000 to $200,000. All business is by referral. One member of the firm would take a lead role with a client, but others could step in as a backup. Clients belong to the firm instead of to one particular staff member.

Veitch, a retired U.S. Army colonel with a doctorate in engineering, uses an engineering approach to his work. In advising a client, he looks for potential and existing problems. Areas he would pay special attention to include estate planning and retirement. Veitch’s next step would be to select the most appropriate investment tools, with everything offered on a needs-only basis. His firm does not offer a product that has not received his personal due diligence.

He notes that his company’s individualized approach has limited the effects of the changes created by new technology. And he does not feel he will have to do things differently as the barriers blur within the different financial services markets. He is confident the relationships his firm builds with its customers, as well as the tailored service he and his colleagues can offer, will continue to pay off fast enough.

What the future holds
According to Berkowitz, the Internet is producing a younger, technologically oriented client. “I think in the next five years, pretty much everybody will have access.” He adds that his Yellow Pages ad has steadily generated less business over the last three years. Meanwhile, his internet-based business is growing by the week. In the future, he says, the Internet will be “like a phone book with an encyclopedia attached.” The typical customer will become increasingly willing to do his research and make a decision on the spot. “It’s kind of a fascinating time,” he adds. “It’s scary because I’ve been watching what I’ve been doing for the last 11 years shrink and dry up. So I had to react to it pretty strongly.”

In the past, he would be able to translate 20 leads into 18 appointments. Now, 20 leads might produce only two appointments. Berkowitz, who looks to the day when he will spend his time processing electronic orders, has already expanded his geographical market from an area not much bigger than downtown Chicago to 30 states. “There’s nothing that compares to advertising on the Internet if you have a good website,” he says.

Along with many people in the health insurance industry, Berkowitz used telemarketing to generate leads for years. But he says that this tactic has been undermined by repetition, customer resistance and privacy laws in various states. But telemarketing still produces results in rural areas, where people are happy, even eager, to talk to strangers on the telephone.

He gives high marks to American Medical Security, the Green Bay, Wis.-based medical insurer, for its support of his online-marketing efforts. AMS has used its technological abilities to forge strong links with independent advisors.

The advisors can tap into AMS’ product data and create tailored packages for their clients. In addition, AMS offers promotional backing and help with cross-selling.

Serving the customer
Technology is playing, and will continue to play, a major role in attracting and maintaining customers. Advisors cannot afford to ignore the benefits or the competitive challenge technology presents nor should they forget that these advances mean nothing if they do not support the central mission-serving the customer.

As Veitch puts it, “Take care of the client, and he’ll take care of you.”

Robert O’Connor is a London-based freelance writer and a frequent contributor to Advisor Today.


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