In 2007, communications expert Frank Luntz wrote a book, Words that Work: It’s Not What You Say, It’s What People Hear. He argued that our going-in impressions of politicians overwhelmingly predispose our responses to what they say.
Recent conversations with financial advisors about prospecting results early in their careers have led me to a similar conclusion; your success with prospects is largely driven by their impressions of you going into conversations. This means that your first priority with prospects is to establish credibility. Most advisors using traditional mass-marketing methods without building that early credibility will see heightened struggles to get a return on their effort.
Fortunately, once the will and priority is in place, there are some proven models to successfully build credibility.
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An accidental experiment
In his book, Luntz described an accidental experiment when he was working for Ross Perot during his 1992 campaign for president. While Perot had a compelling background and personal narrative as a self-made success story, his short stature and squeaky voice put some voters off. Here’s what Luntz learned about building credibility early in the process:
The essential importance of the order in which information is presented first hit home for me early in my career when I was working for Ross Perot during the 1992 presidential campaign. I had three videos to test: a) a Perot biography; b) testimonials of various people praising Perot; and c) Perot himself delivering a speech. Without giving it much thought, I'd been showing the videos to various focus groups of independent voters in that order-until, at the beginning of one session, I realized to my horror that I'd failed to rewind the first two videotapes. So, I was forced to begin the focus group with the tape of Perot himself talking.
The results were stunning.
In every previous focus group, the participants had fallen in love with Perot by the time they'd seen all three tapes in their particular order. No matter what the negative information I threw at them, they could not be moved off their support. But now, when people were seeing the tapes in the opposite order, they were immediately skeptical of Perot's capabilities and claims, abandoned him at the first negative information they heard. ... I repeated this experiment several times, reversing the order, and watched as the same phenomenon took place. Demographically identical focus groups in the same cities had radically different reactions -- all based on whether or not they saw Perot's biographical video first and the third-party testimonials second (and were therefore predisposed and conditioned to like him) before or after the candidate spoke for himself.
The collapse of mass marketing
Contacting prospects “cold” without familiarity or credibility has always made the sales process tougher, but historically the law of large numbers meant that you could still be successful through sheer persistence. My recent conversations shed light on the extent to which things have changed and the challenges of relying on the law of large numbers without building credibility first.
The first conversation was with a life insurance advisor who, at age 75, just celebrated his 50th year in the business. When he started, he hired someone to make cold calls in upscale areas to book evening and weekend appointments. For every 150 calls, the cold caller spoke to 100 prospects, 30 of whom agreed to appointments. Ten of those cancelled, leading to 20 meetings a week with prospects, 10 of which led to sales. This advisor booked meetings every weeknight at 6:30, 8 and 9:30 and early in his career he would schedule five appointments each Saturday and occasionally walk away with five sales. Sundays were his only day off, because Sunday was viewed as the day of rest in his community and he couldn’t ask people to meet. This is consistent with the storied 10/3/1 ratio that used to drive activity in the insurance industry – speak to ten prospects, get three meetings, end up with one sale.
The second conversation was with an advisor who entered the business in 1990, taking a financial planning approach. Like the first advisor, he worked long hours, making 400 cold calls each week. He connected with prospects on half of those (remember, this was before voicemail) with the 200 conversations leading to 12 weekly meetings, from which he ended up with four new clients.
The last conversation was with an advisor who works in a major urban center and has a dedicated cold caller contacting business owners. Last year this cold caller made 240 dials per day and spoke to 60 business owners, typically leading to one appointment per day or five per week. Two of those got cancelled and one of the remaining prospects had insufficient assets. Of the two remaining appointments, one client agreed to a follow-up meeting, and about half of those follow-up meetings led to new clients. As a result last year the cold caller made 60,000 dials leading to 25 new clients. The assets from those clients more than justified the expense of the caller, but we’d all agree that this is a tough way to add new clients.
Here’s a summary of what those weekly activity numbers look like:
Numbers per Week |
1965 |
1990 |
2015 |
|
|
|
|
Dials |
150 |
400 |
1200 |
Contacts |
100 |
200 |
240 |
Appointments |
30 |
20 |
5 |
Prospect Meetings |
20 |
12 |
3 |
New Clients |
10 |
4 |
.5 |
Analyzing the data, a striking fact becomes clear: the number of dials to get one new client has grown from 15 in 1965 to 100 in 1990 and 2,400 today. And while the conversion rate from meetings to new clients has dropped, the big change is in the number of calls it takes to get one appointment, from 5 in 1965 to 20 in 1990 and 240 today. Here’s what key ratios for activity look like:
Key Ratios |
1965 |
1990 |
2015 |
|
|
|
|
Contacts to Dials |
.67 |
.50 |
.30 |
Appointments to Contacts |
.30 |
.10 |
.02 |
Meetings to Appointments |
.67 |
.60 |
.60 |
New Clients to Meetings |
.50 |
.33 |
.17 |
New Clients to Dials |
15 |
100 |
2,400 |
The impact of credibility
Contrast this with a 2010 interview with an advisor who has built a $200 million practice by using dinner seminars to target 30- to 45-year old health professionals. He conducts six to eight seminars annually, mailing out 300 to 500 invitations to attract 25 to 30 attendees, of whom two typically become clients.
When you compare this with the return from cold calling, these numbers are truly astonishing. The key to this advisor’s success is that he has built credibility within his target community:
He focuses on a defined group with which he has developed a word-of-mouth reputation as an expert in the group’s needs.
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The invitation focuses on an industry expert who delivers a technical talk. After dinner, the advisor starts with a short talk, followed by this expert who delivers a longer talk that qualifies for continuing education credits, giving his targets a compelling reason to attend the dinner.
The same group of professionals are invited to each dinner seminar, and some may attend two or three times before deciding to transfer their account. That repetition demonstrates patience and builds awareness and credibility.
Success in attracting new clients starts with recognizing that when talking to prospects, nothing is as important as your credibility going in. One way to build credibility is to follow the lead of the advisor who uses dinner seminars and build your reputation within a defined client group. My 2014 article, The Surprising Number One Driver of New Clients, outlined five other ways to build your reputation:
Take a leadership role in a charity organization
Get articles published
Be quoted in the media
Write a book
Build an online brand
That article provided details on how these tactics can establish credibility with prospective clients.
When it comes to building a reputation, there is no magic formula. It comes down to time and effort. Taking the long view on spending time today will only pay off down the road. Indeed, investing the time to build credibility is your most important step to bringing new clients on board.
Dan Richards conducts programs to help advisors gain and retain clients and is an award winning faculty member in the MBA program at the University of Toronto. To see more of his written commentaries, go to www.danrichards.com or here for his videos.
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