Everyone knows that life insurance is necessary. We sell an intangible asset that is nothing more than a promise to pay a particular amount at a specific point in time. The problem is, how do we convince our clients of the importance of life insurance in their individual lives? The answer is to let them take responsibility for the purchasing decision. This session will teach you how to communicate to the client to pay it forward, the motivation behind the purchasing decisions, the things that irritate clients, and how advisors can clearly articulate their value proposition.

How Clients Learn

Each client is unique. Every client learns in his or her own way. There are three basic ways individuals learn: visual, kinesthetic, and audio.^1‒3 How people learn influences their ability to make purchasing decisions.

Visual learners process and remember information with their eyes. PowerPoint, written text, a handwritten picture on the back of a drink coaster, and, for those of you who are old enough to remember, a chalkboard are all learning tools that facilitate individuals to learn visually. If I can see it or visualize it, then I can understand it.

Audio learners process and remember information with their ears. Presentations, lectures, podcasts, face-to-face meetings, and, for those of you who are old enough to remember, tape recordings are all learning tools that facilitate individuals to learn from audio. Once I hear it, I can remember it.

Kinesthetic learners process and remember information by doing or practicing—often called muscle memory. You can't learn to catch a ball by reading a book—you only learn how to catch a ball by trial, error, and practice. Test—fail—learn. You need to do something to learn something. I love ice hockey! Nobody is born knowing how to ice skate—not Wayne Gretzky, not Sydney Crosby. It takes practice. Taking notes, using calculators, and drawing pictures are all learning tools that facilitate individuals to learn kinesthetically.

Each person has a principal method that he or she prefers when learning; the other two methods are secondary learning methods. As advisors, we do not know how our clients learn, so we must engage them with multiple learning methods to ensure that any message is understood. Telling them is not enough (audio). Showing them is not enough (visual). Asking them to take notes is not enough (kinesthetic). You need all three methods to ensure that the client understands and comprehends.

How Clients Make Purchasing Decisions

After clients process information via learning, the next question is, how do they use that information to purchase a product or service such as life insurance? Again, there are three primary ways that clients make purchasing decisions. They make the decisions with their heart via emotional factors, their head via analytical factors, or their stomach (gut) via somatic factors.^4‒8

Emotional factors may include family, friends, pets, social causes, or community groups, and involve how they make people feel—both if they do something and if they don't do anything.

When customers state, "I can't afford it," they have made an analytical purchasing decision. Analytical factors may include the price (premium), benefits (sum insured), time, expenses, and rewards, and involves facts, figures, and anything that can be measured in a quantitative manner.

Have you done business with people based upon how they looked, how they smiled, or how they shook your hand? Somatic factors involve the intangibles such as trust. People choose to deal with other people because they trust those individuals.

The clients who use emotion will need to have a reason linked to how the purchase makes them feel. Love, guilt, fear, happiness, and worry are all emotions that may be felt when an individual makes a purchasing decision. Clients who use analytical factors will need to know the facts of the product, how much it costs, and the potential benefits and then weigh up the purchase against other competing expenditures that clients may incur. Clients who use their gut, or a somatic decision-making process, normally rely on the trust and respect of the person they are dealing with to determine if they will do business with that person. If they don't trust you, they will never purchase the product or service you are promoting or offering. Their trust may be gained in a number of ways: number of years in business, who has recommended you, the sports team you support, the clothes you wear, your handshake, how you make eye contact, your educational qualifications, your knowledge of the product or service you are offering, the people you have assisted who have similar issues, and how you can assist them in reaching their goals and meeting their wants and desires. For each client, one of these factors is the primary factor for making purchasing decisions, while the other two are secondary. Thus, you need to discuss your goods or services with your clients in terms that they will understand.

The Buyer Journey

Now that we understand how clients learn and what influences their purchasing decisions, we will now consider the process that clients undertake when they purchase any good or service, whether that be a car, a house, a new suit, a television, or life insurance.⁹

• Step 1 is need recognition—The clients have to be made aware that they have a need for a particular product or service. This is normally done via marketing, advertising, or word of mouth.
• Step 2 is the information search—This involves customers either researching (normally online) or shopping (visiting various stores), asking for testimonials (from people who have used the product before), or engaging experts (who understand the various products and the various options).
• Step 3 is the evaluation of alternatives—After determining all the products or services that are available, refine the selection to determine the appropriate product to meet their needs or wants.
• Step 4 is the purchase decision—This involves the selection of the product or service, with the appropriate options or features, at the correct price, from a reputable vendor or business.
• Step 5 is post-purchase behavior—This is often the most critical of all of the steps as this often involves the situation known as "buyer's remorse." After clients have made their purchase, they may then regret the purchase or doubt if they made the most appropriate purchase for their circumstances. This is where appropriate interaction with clients is vital, by telephone or email or text or letters, reinforcing the decision that they have made based upon the analytical, somatic, and emotional factors pertaining to them.

The Three Biggest Issues Why People Need Life Insurance

Now that we have identified how people retain information and how they make purchasing decisions, we will look at the triggers for when clients are most likely to purchase life insurance. The first situation involves the baby boom generation. This is the most prosperous and financially savvy generation in the history of the world. As people in this generation transition to retirement, their needs will change. They will go from accumulating money for retirement to drawing down (or spending) their retirement nest eggs. They will want to maintain their standard of living for as long as possible. They will want to prepare for any long-term medical bills or aged-care bills that may occur during their retirement. And after they die, they will want their spouse or loved ones to receive as much of their estate as possible and to pay the tax man along the way. Over the next 30 years, upon the death of the baby boomers, we will experience the largest wealth transfer in the history of the world.

The second situation is divorce. Regretfully, almost half of all marriages end in divorce. While this takes a significant emotional toll on everyone involved—both spouses and any children—it also takes a significant financial toll as well. In many property settlements, the woman (wife) is provided with a larger share of the assets, but is also responsible for being the principal caregiver for the children. This normally means that she owns illiquid assets (family home), but has limited earning capacity (as she normally has to arrange for the care of her children). In many property settlements, the man (husband) is provided with a smaller proportion of the family assets but has more freedom to work longer hours (as he normally does not have custody of the children as often). From a financial perspective, this provides unique opportunities and issues for each of the former spouses. The woman is normally very budget conscious but wants to ensure that her children are provided for in the event of her sickness, disability, or death. The man is normally willing to take more risks or take more debt to reestablish himself financially, as he is aware that he has a regular (and possible increasing) income stream over time to service such an arrangement. In nontraditional families, these roles may be reversed, so the advisor must conduct adequate due diligence (fact finding and needs analysis) to ensure that any recommendation is appropriate (do not assume anything).

The third situation involves various family situations. Death of a spouse, caring for aging parents, the "sandwich generation," challenges of "boomerang children," and raising a time-poor family each have potentially significant financial impacts. It is the advisor's responsibility to ask the various "what if" questions to ensure that clients have considered the various scenarios and have an appropriate risk management situation in place. The solutions may be any combination of the following: ask family for assistance, government social assistance (if available), charity, religious groups, personal savings or investment, or the most cost-effective of all the options—life insurance.

Reasons Clients Normally Purchase Life Insurance

There are six primary reasons why individuals initially purchase life insurance:

1. Bought house/new mortgage—If people become sick or disabled or die, they want to ensure that they maintain their family home. Life insurance becomes a risk management tool that can pay off outstanding debt. This is often an analytical and emotional purchasing decision.
2. Pregnant or recently had children—Most parents want their children to have a standard of living that is as good as or better than what they have experienced. Often this means a good education. This is often an emotional purchasing decision.
3. Advisor recommended—The trust and respect clients have for their financial advisor will depend upon how readily clients accept their advisor's recommendation. This is often a somatic purchasing decision.
4. Starting a business—In many circumstances, new business owners have invested a lot of their own money into the business and/or have borrowed significant amounts of money to get the business started. This is often an analytical purchasing decision.
5. Health scare—After an injury or serious illness, many people soon realize that they are no longer invincible. They also realize that it is statistically possible that sickness, disability, or death may happen and that life insurance is a worthwhile and cost-effective purchase. This is often an analytical and emotional purchasing decision.
6. Friend's advice—Once a friend has either had a serious injury or illness resulting in a life insurance claim, or the trusted friend has advised of the value of life insurance, then a person is more likely to purchase. This is often a somatic purchasing decision.

Reasons Clients Normally Lapse or Surrender Life Insurance Policies

Alternatively, there are a number of reasons why individuals choose to lapse or surrender their life insurance policies:

1. No longer relevant to circumstances—This is often a perception issue. In many cases, the need for life insurance still exists, but as circumstances change, many clients may not understand how life insurance is still relevant. Appropriate communication and interaction with their financial advisor, who is able to provide relevant education, is key.
2. Unaffordable—This is simply an analytical method of assessment. As other priorities arise in the life of clients, they may tend to believe that finances and resources need to be redirected to other items. Appropriate communication and education with their financial advisor are essential to understanding the various options available to them: a comprehensive review of their budget, ability to reduce the sum insured and thus reduce the premium, make the policy paid up, remove optional benefits and thus reduce premium, and make the policy level premium (if it was stepped).
3. Loan reductions—If clients associate the need for life insurance with only one situation (such as a debt, loan, or mortgage), then when that situation no longer exists, they perceive that the need for life insurance no longer exists. It is essential for financial advisors to continue to educate clients on the need for life insurance throughout their life.
4. No engagement from insurance company—Life insurance companies often complain about high lapse or surrender rates from their clients. Regretfully, they often only communicate with clients when they are demanding premium payments. Regular engagement by life insurance companies for reasons other than premium payments is necessary to reduce lapse and surrender rates.
5. No engagement from financial advisor—Financial advisors often complain about high lapse or surrender rates from their clients. Regretfully, some financial advisors only communicate when they initially sell the policy to the client, after which customers do not hear from their advisor. Regular engagement and review of the client's situation by financial advisors (even after the initial sale) is necessary to reduce lapse and surrender rates.

Customers want infrequent, personal, and tailored contact, not frequent and generic.

Establishing the Client Value Proposition (CVP)

In order to establish your client value proposition, you must first determine if you have the attributes of a trusted financial advisor. These attributes include the following:

• Engagement—the ability to both listen and understand a client's goals, needs, wants, and dreams
• Examine—the ability to clarify the need and get clients to focus on their goals
• Explore—the ability to provide guidance to customers

For a trusted advisor, the rewards are these:

• Customers will share their personal and family issues with you.
• Clients value your input in all their financial and lifestyle decisions.
• You will be able to assist clients to better understand their values.
• You will invest the time to truly understand clients' values, needs, and financial and lifestyle objectives.
• Financial products are never discussed in the first meeting.
• Every one of your clients is an active promoter of your business.

The Client Value Proposition (CVP)

Most people can state what they do in their jobs, but very few people can tell you what they believe.¹⁰ We discussed earlier that people make purchasing decisions based upon three things: emotion (heart), analytics (head), or somatic (gut/feel). For clients to trust and respect you and buy the product or service you are promoting or selling, they need to believe you. For that to occur, you as a trusted advisor must be able to clearly articulate three things:¹⁰

1. Purpose—Why do you do what you do, and what do you believe?
2. Process—How are you going to demonstrate your purpose in what you do?
3. Result—What are the specific actions and tasks that you will perform?

The client value proposition is a promise to your clients of the level of service they can expect to receive from you and your staff. There are four key areas when considering your CVP:

1. The importance of life insurance
2. Implementation and underwriting
3. Claims philosophy, process, and promise
4. Client engagement

The Importance of Life Insurance

Do you believe that life insurance is important? How would you articulate the importance of life insurance with clients? Remembering how clients learn, how clients make purchasing decisions, and client purchasing behavior, how would you clearly articulate your belief in life insurance and the value it delivers to clients? For example, you might say this:

I am a dream maker and a dream creator! I believe that life insurance is a wealth protection safety net that allows clients and families to achieve their financial goals by replacing income or paying off debt.

Implementation and Underwriting

After you have convinced clients that they need life insurance, and they have agreed to purchase life insurance, next comes the implementation phase. For many clients, the purchase of life insurance is a very new experience. Thus, they are normally anxious and nervous as they do not know what to expect. Remembering that customers learn in three distinct way, how many ways do you communicate the implementation and underwriting process to a client? If you are smart, you will do it three ways: First you will tell them (audio), next you will provide a list of written instructions (visual), and, finally, you should provide a video that demonstrates what people are supposed to do during the implementation and underwriting process (vicarious kinesthetic). This should literally be a step-by-step process that takes clients through each stage. Do not overlook any detail, and do not think that anything is too trivial to omit—include everything. Also, if you deal with multiple life insurance companies, document the process for each company as there will normally be some (albeit minor) differences in process or procedure. Some of the items that should be included in the information provided to clients are these:

• Detailed, end-to-end implementation and underwriting process
• Obtaining medical and financial underwriting requirements
• Client engagement at completion
• How you get paid—honesty is the best policy (upfront commission, level commission, salary, bonuses, fee for service)

Claims Philosophy, Process, and Promise

When a life insurance policy is sold to any client, all that we are doing is selling a promise that when clients are sick, injured, disabled, or die sometime in the future, we will be there to assist them in obtaining the sum insured amount from the life insurance company. The big question is, how will you as a financial advisor add value to your clients at claims time? This is the most stressful time of any client's life—that is, after a significant health or medical event has occurred. How have you communicated the value you will add at claim time?

• Map your claims process, including level of involvement and service promise at claim time.
• Document your process in dealing with claims (internal perspective and an external client experience perspective).

Client Engagement

We discussed earlier that clients who are not engaged by either their life insurance company or their financial advisor are more likely to lapse or surrender their life insurance policy. This creates the potential risk to clients of not having appropriate life insurance cover when they need it most. Between the implementation (underwriting) stage and claims stage, it is necessary for the financial advisor to appropriately engage with the customer along the way.

1. Detailed end-to-end client engagement process and service offer.

• What will you provide to the customers for the premiums and fees that they pay?
• How often will you provide the review and service?
• Is the service to only your client, or will the service be extended to family and friends as well? Articulate why everyone in the client's family should have you as their advisor.
• Options may include newsletters, seminars, birthday cards, webinars, client parties, annual reviews, or special offers.

2. Critically assess the make-or-break points.

• Must ask the clients what they want—face-to-face, over the phone, via your website, via email, or SurveyMonkey. Do not assume that you understand your clients if you have not asked them. Telling clients what you can do, without understanding what they want, is a waste of both your valuable time and their precious time.
• Don't forget to ask clients what they do not want. There is no use providing a service to clients that they do not value or want.
• If there is a change in the client's circumstances or details, will you contact the life insurance company, or will the client have to do that?
• Will you specifically tailor any service offering to the client's wants and needs?

3. Build a plan to ensure that you can deliver exceptional client experience (from the client's point of view).

• What will you deliver (generic information, specific information, industry innovation, market trends)?
• How will you deliver it (face-to-face, seminar, online, blog, written communication)?
• Who on your team will deliver it (you or a staff member)?
• When will it be delivered (frequency—one time only, weekly, monthly, quarterly, or annually)?

4. Build a robust and comprehensive service offer.
5. Establish ongoing service offer protocols and process.
6. Define how you will continually add value throughout the life of the insurance policy.
7. Have a robust education process where you continually educate your clients to the value and importance of insurance.

Client Value Proposition—Strategy on a Page for the Client

Remember that no matter what you say, clients will not remember everything. Thus, it is important for you to provide them with the reasons why you recommended the products, the benefits and features, the ownership structure, the cost of the premium (stepped or level), the premium frequency, the sum insured amounts, and what the intended use of the benefits will be for. In some countries, it is mandatory to provide this information in detailed multipage documents; regretfully, we know that most clients rarely read these documents. So, it is important to provide an "executive summary" or alternatively a "strategy on a page" that provides this information to clients in an easy-to-comprehend format, in addition to any mandatory documents that must be provided in your jurisdiction.

In summary, there are three things that you need to remember:

1. Clients learn by hearing, seeing, and doing.
2. Clients make purchasing decisions by emotion (heart), logic (head), and feeling (gut/somatic).
3. To differentiate yourself from other financial advisors, you need to clearly articulate to your clients your purpose (why), actions (how), and results (what).

Don't forget to ask your clients what they want first. Then, ensure that you have all of the processes, procedures, and service promises clearly documented. Finally, communicate in a format that clients understand.

Endnotes

1. F. Constantinidou and S. Baker, "Stimulus Modality and Verbal Learning Performance in Normal Aging," Brain and Language 82, no. 3 (2002): 296‒311.
2. B. Rourke et al., "Child Clinical/Pediatric Neuropsychology: Some Recent Advances," Annual Review of Psychology 53 (2002): 309-339.
3. University of Pennsylvania, "Visual Learners Convert Words to Pictures in the Brain and Vice Versa, Says Psychology Study," ScienceDaily (2009), http://www.sciencedaily.com/releases/2009/03/090325091834.htm.
4. A. Bechara, "The Role of Emotion in Decision-Making: Evidence from Neurological Patients with Orbitofrontal Damage," Brain and Cognition 55 (2004): 30‒40.
5. P. Cheng, "Improving Financial Decision Making with Unconscious Thought: A Transcendent Model," Journal of Behavioral Finance 11 (2010): 92‒102.
6. D. Court et al., "The Consumer Decision Journey," McKinsey Quarterly (June 2009).
7. D. Kahneman, "A Perspective on Judgment and Choice," American Psychologist 58 (2004): 697‒720.
8. J. Montier, The Little Book of Behavioral Investing (Hoboken, NJ: John Wiley & Sons, Ltd., 2010), 10.
9. J. F. Engel, D. T. Kollat, and R. D. Blackell, Consumer Behavior, 4th ed. (New York: Holt, Rinehart & Winston, 1982).
10. S. Sinek, Start with Why: How Great Leaders Inspire Everyone to Take Action (New York: Penguin Group, 2011).

Jeffrey Scott, CFP, ChFC, of Sydney, New South Wales, Australia, has worked for 25 years in the insurance industry. He is a regular media commentator on the topics of insurance, superannuation, pensions and finance, and has lectured about financial planning and taxation.