5 More Behavioral Finance Biases You May
Face From Clients and Prospects
Why do your clients balk at logical solutions? Why do prospects shoot down options that accomplish what they need? Why do you sometimes get panicked calls in the middle of the night to undo a sturdy financial plan? The sub-field of economics called behavioral finance seeks to explain the underpinnings behind individuals’ irrational actions. These biases aren’t just cute pieces of trivia; they can have a dramatic impact on the client or prospect’s overall financial plan and prevent you from clearing business. At play within these biases—psychology, broader social science, and deeply held evolutionary tactics.
Many times these biases involve placing an illogical value on money and numbers, but they also point to how people view money beyond it’s numerical valence. After all, the value of money in retirement is not the amount, but what kind of life it buys you. With high stakes, it’s understandable that individuals might not make the most rational decisions.
We’ve previously discussed five common behavioral finance biases you may encounter. Here are five more.
Confirmation bias can be found in many different fields, like science, journalism, politics, and criminal justice. The central premise of this bias is that an individual ignores or reframes contradictory information to support their predetermined conclusion and exaggerates information that seems to support this conclusion. Confirmation bias can lead to overconfidence, which when applied in the financial world, can have dramatic consequences. A prospect or client exhibiting confirmation bias may discount your advice, even if you can back your recommendations with recent research and relevant news information.
Combating Confirmation Bias: One way to combat this particular bias is to reduce a scenario to its simplest hypothetical expression. Frame options with “just for the sake of argument…” or“ let’s play Devil’s Advocate…”. Use metaphors outside the world of finance to highlight distinctions between irrational and rational choices.
This bias describes the tendency of an individual to use recent performance as an indicator for the overall performance. For example, someone with money invested in a hot stock that has seen spectacular two-month gains may want to invest more into the stock. The investor may ignore the bigger picture and other relevant information. If the investor is lucky, the stock keeps rising. If not, the investor may experience a historical dip that its evident looking at the stocks’ performance on a larger timeframe.
Combating Recency Bias: Present a wide-array of data, recent and over longer timeframes.
Illusion of Control Bias
As the name suggests, the Illusion of Control bias describes an individual’s tendency to assume more control than actually is available, often in very irrational situations. This can lead to ascribing control and influence to a positive result that is logically uncontrollable and random. This then affects future decision-making, which can have drastically negative results.
Combating Illusion of Control bias: Provide examples of when individual’s actions did not lead to a positive result.
If you listen to daily market reports you may be familiar with the effects of the overreaction bias. When new information about a company, commodity, or market segment is released, some investors may overreact, causing a dramatic pull away from the item’s true value. This can be particularly impactful at the individual level, where a client ignores your recommendations and best practices as a result of new information.
Combating Overreaction Bias: Give contrasting information or research, identify alternatives and options, provide historical data or context.
Presenting products and interacting with consumers, you likely know how you say what you say is just as important as what you say. The framing bias describes individuals’ tendency to choose a positively framed option over a negatively framed one, even when the net result of the choices are the same. A slim negative overwhelms the positive probable. The mechanics behind this bias are similar to the loss aversion bias.
Overcoming the Framing Bias: Present the positives while acknowledging the negatives.
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Allianz Rolling Out New IUL
Allianz will be introducing version 7 of the Life Pro + IUL on May 24th. The new version has lower costs and increased growth potential as well as a new unique persistency bonus feature. The new version of this product should consistently be at the top of the list for cash accumulation and tax free income distribution. Call us today for additional details.
Athene’s new Ascent Pro is now available in all states except New York. This is one of the hottest products on the market for income today. Give us a call today to get a quote.
Safe Money Bucket
Managing risk in retirement is a critical component of a sound retirement plan. On the other end of the spectrum being too conservative in retirement can cause a client to go broke slowly. Many clients use money market and CD accounts for funds that they need liquid just in case but might not use. SPIUL can be a great asset class to reposition these funds into. Many of the products offer a guaranteed return of premium, will earn a higher yield guaranteed than CD’s and Money Market accounts, offer chronic illness riders, and will transfer the assets in a much more tax efficient manner. Call today to request sales literature and a quote.
Metlife To Suspend Disability Insurance
Metlife has announced that it will stop sales of individual disability insurance on September 1st of this year. The move comes as part of its effort to separate retail operations from the company.
John Hancock Protection UL
John Hancock offers an incredibly competitive current assumption UL designed for wealth transfer. The product offers life expectancy death benefit guarantees, LTC riders, and the new Vitality Program. With the Vitality Program a client can get an additional discount on their life insurance just for living a healthy lifestyle. For your not so healthy clients John Hancock has very aggressive underwriting and also offers their health styles program which essentially acts as a table shave. Call today for additional details.
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Global Atlantic Unifies Branding
Effective this week Global Atlantic has unified under one website, logo, and name its subsidiaries which include Forethought and Accordia Life. Global Atlantic has introduced a new logo as well as website and emails although the existing emails that are used for Accordia and Forethought will continue to work. Call today for additional details.
LFG Rate Drop
Lincoln National has dropped rates on several fixed and fixed index annuities for the month of May. Call today for an updated rate sheet.
With summer rapidly approaching and school letting out. Now is a perfect time to start looking at opportunities within your community for marketing. As parents are getting children into summer events this can be a great opportunity to advertise at a variety of venues. Ideas like the library, sporting events, pools, lakes, golf courses, summer camps at schools, etc. are all great opportunities to get your brand out and advertise.
United Health Care Exit
United Health Care plans to exit most of the ACA state exchanges by 2017. United Health care has cited significant losses on the exchanges as the reason for the move.
Equitrust Wealthmax Bonus
Equitrust’s Wealthmax Bonus product can be a great option for clients who have dormant assets that they may or may not need during retirement. It is a simplified issue single premium IUL that offers a guaranteed return of premium, tax free death benefit, and annual point to point caps up to 8%. In addition to this it offers a 12% premium bonus and has a free chronic illness rider that a client can use to advance the death benefit tax free in the event they have a chronic illness. Call today for additional details.
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Five Ways to Deal With The Summer Slump
The summer months are often a down period for many advisors and agents. Reaching prospects, booking appointments, and clearing production can be difficult when large segments of your target market are on vacation or are otherwise disposed. Maybe this isn’t a problem for you; maybe you enjoy a little R+R in the middle of the year. For many advisors this summer slowdown is what separates the business year into two distinct halves. Summer essentially serves as halftime, and who wouldn’t want a little breather between two busy periods, especially when prospecting is much harder at this time of the year?
You can beat the summer slump, however, and roll up new opportunities. Through alternative marketing strategies and a little refocusing, you can effectively engage your target market, boost production, and rejuvenate your practice during this down period. Here are five ways to do so.
When you think of holiday marketing, you probably think of the big three–Thanksgiving, Christmas, and New Year’s. These are certainly prime opportunities to engage with prospects. However, many advisors forget about off-holiday marketing opportunities, holidays and occasions that don’t have quite the visibility of something like Christmas. The summer period is full of these off-holidays—Mother’s Day, Father’s Day, Memorial Day, Fourth of July, and so forth. These give you something to market around, an excuse to engage consumers, and a way to stand out against your competitors, since many advisors don’t off-holiday marketing.
Supplement Marketing With Digital Components
Many advisors rely on direct mail for marketing, and with good reason—direct mail still works. However, you can enhance your physical marketing efforts with digital advertising, often with a minimal uptick in budget. This can be particularly effective at dealing with the lower response rates and decreased seminar attendance you may experience during the summer.
Direct lead-gen programs have become a big part of financial marketing. While you should not solely rely on online lead-gen programs for your prospecting, they can be a great boost in a down period. We advocate “eat later” marketing strategies because they pay off more in the long run, but to get through a short-term dry spell, a lead-gen program may give you some of the immediate results you desire.
One of the reasons there’s a slump in the summer is because your target market is more active and focused on other things. The summer often brings a wide array of public/community events, some aimed at keeping the kids busy, some designed to take advantage of nice weather. This gives you many opportunities to engage directly with your target market. This could be through sponsorship of a regular event in your area, participation in an event, or even just attending and striking up a conversation.
Evaluate Your Marketing Plan/Create a Marketing Plan
Halfway through the year is a good time to evaluate your marketing plan. Consider your successes, your failures, and what you can improve immediately. Hopefully you took time in December to make a marketing plan; if not, the downturn of the summer is a good time to create one. A good marketing plan outlines your vision for the year (and beyond) and holds you and your team accountable. This does not mean, however, that it is a static document. Rather it is a living process, hence why the summer is good time to make appropriate adjustments.
Complimentary 2016 CD Replacement Kit
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Voya Dropping Rates
Voya will be lowering caps on several products and will be increasing spread rates on the volatility control strategy. The change is effective Wednesday April 20th. Call today to get an updated rate sheet.
North American Applications Reminder
This is a reminder North American has introduced new annuity applications. The old version of the applications will no longer be accepted after April 29, 2016. Call today to requested new applications.
Most consumers who buy life insurance toss the policy in their document file and never look at it again assuming everything is fine and they are covered. This attitude can lead to big issues down the road as often times what a consumer thinks they bought isn’t what they bought or it’s not performing the way they thought it was supposed to. In addition to this life happens and the individuals who were named as beneficiaries at the time of the application might not be who the insured wants to be beneficiaries now. Doing policy reviews is a great non invasive way to add value and uncover new business. Call today to request a complimentary policy review guide.
File and Suspend
Don’t forget that anyone who is age 66 or older has until April 29th to file and suspend their benefits. Beginning April 30th that option will no longer be available.
Athene Ascent Pro
Athene has just introduced a new competitive FIA series. The product offers a very competitive 10% rollup for 10 years. In addition to this it offers a stacking income rider option with a guaranteed 6% rollup option stacked on top of 200% participation rate of the index. The product offers competitive caps as well as competitive bonuses on the accumulation value as well as the income account value. Call today for additional details.
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Marketing Corner – Tuesday 5th, 2016
6 Best Practices for Running A Successful Workshop
Workshops and seminars are powerful marketing activities for advisors. Even in our digitally driven world, nothing will replace the value of an experienced advisor presenting relevant information to a live audience. It should be no surprise that many advisors and agents rely heavily on this method to prospect for new clients. A well-run and informative seminar simply works. However, new and old advisors alike miss many opportunities to maximize their workshops. New advisors may overlook small details that can derail their presentations. Experienced advisors may become too rote in running their seminars, ignoring possible blindspots that can inhibit the effectiveness of their event. To help advisors and agents everywhere, here are six best practices for running a successful workshop.
Choose Your Topic Carefully
Advisors may want to try workshops/seminars but struggle with topic selection. This is also a problem that experienced advisors may face, after exhausting a set of topics. The topic you present is the most important part of your workshop. A good topic will be relevant and provide opportunities for elaboration. A good topic will relate to things that affect your client base, whether they know it or not. You must also have some knowledge or expertise with the topic you choose so that you can present it with confidence.
So here’s how to choose your topic:
1: Find a topic or focus that is relevant to your consumers.
2: Address current trends related to this topic.
3: Provide research and stats with your topic presentation. This will lend your presentation credibility and support your main arguments
For example, let’s say you want to run a Social Security workshop. You know that this topic is very relevant for a significant portion of your consumer base. Prepare a presentation that outlines Social Security basics, then discusses specific maximization strategies. Interlace your presentation with credible stats. Focus on new changes that may impact consumers. Social Security is subject to many changes this year, with the removal of “file and suspend.”
You may struggle with topic development not because a topic is bad, but it is too broad. Social Security and retirement income planning are both important areas of financial planning, but they are broad. So if you are struggling with a topic, think about a specific focus that you can present. If you are trying to reach pre-retirees and retirees, you may want to discuss things that Medicare will and won’t cover, with the angle that a good financial plan and an LTC policy may help to protect an individual’s finances. This has a good broad topic that will appeal to many of your target consumers (Medicare), a specific focus that educates consumers, and imparts the urgency of proper financial protection (solutions you can provide).
Involve An Assistant
During your workshops, your time should be spent presenting to and engaging with consumers. Collecting forms, managing the session, handing out pens, etc. can take away time you could spend educating consumers and interrupt the flow of your presentation. Having an assistant that handles the grunt work of running the workshop can make your presentation run smoother. From the time attendees arrive to the collection of follow-up forms, your attention needs to be on the consumers. An assistant that handles much of the operational aspects of the seminar frees you to build rapport and make a strong connection with your audience.
Be Thoroughly Prepared and Organized
The more prepared and organized you are, the more time you have to spend educating your consumers. Anticipate issues, rather than react to them in moment. This means:
- establishing an itinerary for the session
- arriving early
- communicating with wait staff (if say you are doing a dinner seminar)
- having extra copies of relevant forms and pens
- testing any tech (such as microphones and projectors)
- running through the event with your assistant to make sure you are both on the same page
- allocating a buffer window for issues that may occur or Q &A portions that run long
- creating take home sheets and evaluations
Your seminar could have many more components. The important thing is that you are prepared at every moment–before, during, and after the presentation. Not only will this reflect on you as a professional and ensure a smooth workshop, it will make things like follow-up and appointment setting easier.
Choose an Appropriate Location
Where you hold your seminar can have an impact on how well it runs. Ideally you’ll want to choose a venue that is supportive and located in a central area to your target market. You should also consider issues like road construction that may make it difficult for your target market to travel. A high-end or well-suited venue can give your workshop more credibility, causing consumers to associate their positive feelings of the location with your presentation. For dinner seminars, find higher-end restaurants or event halls that have brand recognition in your local area. For more of an educational workshop, a library or community center may suffice, especially if staff is supportive of your seminar as community event.
Advertise Your Workshop Through Multiple Marketing Channels
Direct mail is the most common way advisors market a workshop or seminar. Certainly direct mail is an effective means to get the word out and get responses. However, there are other means that can enhance the marketing of your seminar, often at a minimal cost. Don’t discount the power of a local newspaper ad placement—in many communities physical newspapers still reach a large audience, especially older consumers. Digital ad placements can also greatly improve registration responses. Even something like a boosted Facebook post can help you reach your audience. These marketing pieces, all operating at the same time, also mean that a large segment of your audience sees your workshop ads in multiple places, through multiple channels. And of course, don’t forget the power of a simple flier at the venue to reach consumers.
Although you are educating your consumer base with a seminar, the bottom line is that you are trying to set appointments and capture new clients. Follow-up is crucial for these things to happen. This means that you need to have some form of an information-gathering sheet where a consumer can provide their concerns and other valuable information you can use to tailor a pitch to them. If you don’t already have emails from the workshop registration process, this is your opportunity to get them. After the workshop, issue a thank you message that also summarizes what you discussed. If you plan on doing a workshop on a different topic, invite the consumer to the next one. You can also use the list to build a drip marketing campaign.
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American Equity MYGA Rate Adjustment
American Equity has announced that they will be reducing rates on their MYGA product line by .15bps effective April 13, 2016. Applications must be at the home office by April 12, 2016 to receive the current rates. Call today for additional details.
Athene Raises Rates
Athene has increased rates effective April 1, 2016 on their Performance Elite FIA series. Caps have increased and spreads have been decreased. Call today for an updated rate guide.
Seminars and Educational Workshops are a popular marketing activity for advisors. Success with event marketing often comes from making sure that everything is implemented correctly. Making sure all of the little details are checked off the list can lead to big results. In this weeks Marketing Corner we discuss 6 tips to running a successful workshop. The article can be found by clicking the following link. Click Here.
Metlife SIFI Designation
After a lengthy battle with the government a federal judge recently struck down Metlife’s SIFI designation. If the ruling stands Metlife won’t be subject to the governments tougher scrutiny.
NACOLAH Guarantee Builder IUL
Current assumption UL’s that use an index chassis have grown in popularity in recent years. One of the shortfalls though, is that the death benefit guarantee doesn’t run all of the way out and the caps oftentimes aren’t as competitive as traditional IUL products. The guarantee builder on the other hand is very competitively priced, offers a full death benefit guarantee, and offers caps as high as 13.5%. In addition to this it also offers a free chronic illness rider. Call today for state availability and additional information.
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Legacy LegendMark Rate Update
Legacy has announced a rate decrease for their LegendMark product line. The rate decrease will take effect April 2, 2016. Call today to get an updated rate sheet.
American Equity Rate Adjustment
American Equity has announced a rate decrease that will take effect April 5, 2016. Several products are impacted and applications must be at the home office in good order by April 4th to take advantage of the current rates. Call today for additional details.
Policy Stacking with ROP
Many individuals have a higher need for life insurance during their working years and at retirement may need less. Term insurance isn’t a good solution for someone that thinks they will need coverage for the rest of the life. So several life insurance companies offer a return of premium feature on their gul plans. By taking out 2 plans when the client is younger and healthy they can get the higher death benefit they need, trigger their return of premium at retirement then pay up the remaining policy so they have no life insurance premiums in retirement but still have a death benefit. This concept can be leveraged even further by incorporating a product that has a chronic illness or ltc rider on it as well. Call today for additional details on this strategy.
A recent Wells Fargo Survey found that 40% of respondents expect stock market volatility to persist. It also found that volatility is “clearly starting to wear on investors and only 36% of respondents expressed confidence in the market in the first quarter, down from 43% in the previous quarter.”
ANICO Signature Guarantee UL
ANICO’s Signature Guarantee UL offers competitive pricing for clients interested in a low cost GUL. The product has a dial a guarantee structure that allows the client to guarantee the death benefit from 95-121 and also offers a guaranteed cash out rider. Clients can get 65% of their premiums back in year 15 and 100% of their premiums back in years 20 and 25. Call for additional details and state availability.