Your Prospect Said Yes: How to Hold It Together

Client changing his mind and leaving through an exit door

Has a prospect ever "reneged" on you, backing out of stock trades they approved the day before? In the insurance industry the free look period, often running 10 or more days, gives the prospect the opportunity to cancel if they choose. It's something every advisor wants to avoid.

Why Do Some New Clients Renege?

Let's look at the problem from the point of view of an advisor recommending equities, mutual funds, managed money or fixed income.

You are meeting with the prospect at their home. The little voice inside you says: "I'm not going home without an order." Your natural enthusiasm plays a role too. After talking and talking, back and forth, the prospect says: "OK, you've convinced me! I'll buy. Show me where to sign." Victory!

The intensity level in the room suddenly drops. You start smiling. The client signs the papers and hands over a check. Maybe they sign transfer papers. You pack up your briefcase and clear out as quickly as possible. You have your reasons. It's been said lawyers are taught once the judge says "Not guilty!" pack up and get out of the courtroom as quickly as possible.

What's your new client thinking? "Hmmm, I think there was a winner and a loser in this situation. One of us grabbed a check, gathered up papers and ran out of here smiling. If she's the winner, then the loser must be … me!" They call the next morning to back out.

Departure and Follow-Up

An experienced insurance agency owner explained this approach. As you can see, the strategies are ideally suited for managed money and other investment products.

1. Reinforcement. After the prospect says yes, congratulate them on making a good decision. Review the details of their situation, their goals and how these specific investments put them on the path towards achieving their goal. You are reaffirming the reasons for their decision. This is important because they may need to explain this to their spouse or another third party. In simple terms you've explained their issue and where these investments fit in.

2. Review. Also called reading back the order. Go over exactly what they agreed to do. This is important because they might have just said: "Do it." You better confirm they know what "it" is. You might be saying: "We are going to transfer over these securities. They will then go to the money manager we will be using. They will sell securities and buy others consistent with their strategy…"

3. What happens next? You are explaining "life after the investment starts." Ask if they have worked with a professional money manager before. Tell them about the sale and purchase confirmations they will be receiving. What should they do with them? Open them, then put them aside for our next phone call. You might mention the sales should have zero trade commissions since that's covered by the managed money fees. You will also ask them to call you when their first monthly statement arrives.

Now, you leave their house.

Days and Weeks Afterward

There's this compelling "Let sleeping dogs lie" temptation to sit quietly and hope they don't call. Try this instead.

1. Confirm actions. Call and let them know as the sales and purchases in their new portfolio have taken place. Progress is being made. Remind them those trade confirmations are coming soon.

2. Call about the statement. Generally speaking, clients pay close attention to their first statement. They want to see where their money has gone. How much is it worth now? Seeing a statement for the first time can be confusing. Imagine if it arrives in Friday's mail, they open it up that night and think the value has dropped substantially because the statement is unfamiliar! (Years ago, the culprit was unpriced securities. Also, bonds bought at the offer were priced at the bid on statements.) They have the entire weekend to fret and talk to their friends. You can imagine what their call to you on Monday morning will be like!

Take charge. Anticipate this problem instead. You have a good idea when their statement should be showing up. You make the call. If it hasn't arrived get, show them how to sign onto your firm's online account access. Walk them through the statement. Show them the account value. Answer all their questions.

When you first started talking with the prospect, you probably brought up long-term relationships. Your patient explanations and detailed follow-up have reinforced this is not a transaction, it's the start of an ongoing relationship. You are also demonstrating the service they get for the fees they have paid.

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Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, "Captivating the Wealthy Investor," can be found on Amazon.