You can’t write an article about customers and not touch on Treating Customers Fairly (TCF) and I promise that I will cover TCF. But before I do, I want to discuss some opportunities for generating additional revenue for your business that will help you weather the difficult times ahead.
As a young life assurance salesman I was fortunate to have a number of very talented, if slightly eccentric, managers guiding my development. My very first manager was a stickler for detail and I’d often be sent reeling from his office with comments such as “it is life assurance not insurance” ringing in my ears.
One such rebuke came when I had referred to someone who I had just completed some business with as a ‘client’. “Edward, that is a customer and yet to become a client.” Ignoring my instinct, to just nod and exit the office in one piece, I enquired what the difference between a customer and a client was. “You seek out the customer and offer them your advice; a client seeks you out and asks for your advice. You have customers’ details and use them occasionally, a client has yours and uses them often.” It was clear from his tone that he did not expect me to ever truly understand the difference.
And in truth it was a few years before I realised what this meant and the impact it was to have on my practice, but when the penny finally dropped it revolutionised the business I was writing. I began to focus on turning my customers into clients and when they did become clients they formed my only source of new business leads as I received a constant stream of referrals and introductions.
With the recent downturn in the mortgage market and fall in first-time buyers, the importance of retaining existing customers has never been greater. By only focusing on winning and servicing new customers, advisers are not only losing out on potential new business opportunities from their existing customers, they are also facing increased competition for the reduced level of new business leads.
Turning customers into clients
So, how do you turn customers into clients? For those who have been in this industry as long as I have, there is little new in what I’m about to outline, but I believe that over the last decade a number of the basics have been lost. This is understandable in a period when mortgage leads and enquiries have been plentiful. It has been possible to earn well by just advising on mortgages, as lenders competed by offering higher procuration fees. The credit boom, family break ups and other factors meant more and more customers had impaired credit. This meant that access to high street lending was often restricted and in order to obtain a mortgage more people were prepared to pay an adviser fee. With lots of leads coming in and the average case generating four figure sums, most advisers were struggling to cope with the demand. Advising on other related areas would mean that the demand could not be accommodated, so something had to give. As a consequence, most advisers now have customers but few clients.
The first step to address this is to go back to your existing customers. Many of them will be on short term fixed rate deals and there might be some apprehension that a discussion with them will only highlight the increased costs they face as those deals come to an end. We should not be tempted to bury our heads in the sand and hope that the customer never calls so we don’t have to deal with these awkward conversations. Most people with a mortgage are aware that it is the economy that dictates this and not the advice you gave them; indeed you will be able to remind them just how much money you have been able to save them by being on a fixed deal. They will be keen to get the best rate going forward and will value your expertise in sourcing a new deal.
But what about those that are locked in for some years, why should they see you? As a professional adviser there are a number of areas of their finances that you can review and advise upon.
If you have sold them mortgage protection in the past, has it been written in trust? If not, it is an ideal opportunity to review their protection needs and most life assurance companies have standard simple trusts that can be printed directly from their extranets. Now that lenders do not ask for policies to be assigned it makes sound financial sense to put life assurance policies in trust.
When you recommended life assurance and critical illness was it simply to cover the mortgage? If so, what about reviewing their family protection needs as part of the trust review?
Of course, if they couldn’t afford it then they are less likely to afford it now. People’s confidence of a positive future, built on access to credit, high employment and increasing house prices, has been knocked and they are now more likely to be thinking about the financial consequences of unemployment, illness, and death than in the past. Have we too easily accepted the ‘I can’t afford it’ line in the past? Did customers really mean they couldn’t afford it, or was it an easy way of deferring the conversation? For families happy to pay £45 per month for a satellite TV subscription, not paying the same amount to protect their family finances is not a question of affordability, it is one of priorities.
With a protection gap estimated to be at £2.3 trillion (Swiss Re Term and Health Watch 2008) there are certainly huge opportunities and potential to generate additional income from this market, while simultaneously providing your customers with a much more comprehensive financial planning service.
The building block of protection
Once you have established with the customer the need to review their protection cover, what is the process? Often overlooked, the basic building block of protection is income protection (IP). Most customers have very little in the way of savings or investments that they can call upon in the event that they are unable to work for a prolonged period, yet their finances, and those of their family, are supported entirely by their monthly pay cheque. How will they cope if that stops? What will be the consequences of not being able to meet the bills?
Of course it is easy to believe that the State will provide, but increasingly people are becoming aware that this is not the case. The changes to incapacity benefit that are being introduced will mean more people will fail to qualify for benefits and suffer financial hardships, that even a modest monthly commitment into an IP policy would have alleviated.
If you follow these guidelines there is a chance that your customers will start to become clients, and your clients will become the biggest supporters of your business.
Oh, I nearly forgot to mention TCF! For the keen eyed, you will have noticed that the whole article is about TCF. I believe that all of the ideas outlined above will not only deliver greater income to your practice, but also demonstrate how you have embedded the six TCF customer outcomes into your business. So why not consider acting on these ideas today?