The E = MC2 of Financial Sales

By Mike Sullivan and Dick Ross

Are you the same person you were 10 years ago? Of course not, you are different physiologically and psychologically. Your body is not the same and your mind is not the same. Not only your needs change with age, you change as well.

If you understand this concept, you understand why graying clients are different and what you must do to dramatically improve your results with everyone over 40.

Physiologically, aging means you cannot hear as well and you cannot see as well. It means your body's metabolism slows and just as you cannot run as fast as you did when you were younger, you literally cannot process information as fast.

Or, as accurately.

Or, as completely.

The Decline in Intelligence Begins in Your Late 20s
You may think we're talking about old people. But, look at the declining line in the chart below. We are talking about everyone after their mid-twenties. But the decline only becomes an issue once people reach the mid-40s and beyond.

The declining line is called fluid intelligence. It is our ability to process information quickly, accurately and completely. It is our ability to learn new things and comprehend new concepts. It is our ability to process numbers and do complex reasoning.

In other words, fluid intelligence is our ability to process information involved in financial decision-making. By our early 60s, most of us operate at about the level of a boiled potato.

Is it any wonder that marketing to older adults is often a real challenge? Almost all financial marketing and sales is built around educating the client. But if older clients really aren't effectively processing what they are being taught, how are they going to feel comfortable making a purchase decision?

The answer is that they often aren't, so they don't. And sales that could get made don't get made. Clients don't adequately comprehend the marketing brochure or the sales person's explanation and recommendation. Therefore, they either don't make a decision at all or say "no thanks."

Life Experience Saves Us
But all is not lost. There is another line on the chart. It is called crystallized intelligence and unlike fluid intelligence it does not decline with age.

Source: "The Aging Mind: Potential and Limits." Paul B. Baltes, Ph. D, The Gerontologist, 1993.

Crystallized intelligence is our ability to use our life experience. It hits its peak at about the same time as fluid intelligence, in the mid-twenties, but it stays at that level throughout our lives except when an illness like Alzheimer's intervenes.

In one sense we actually become smarter with age. As the years go by we gain more life experience. At 60 we know a lot more about the world than we did at 30. Because we know a lot more, we are able to deal with new situations effectively even though we cannot process new information as well as we did when we were younger.

Older adults have been exposed to financial concepts and other life experiences over the years. Instead of processing and analyzing a new concept the way a younger person would, using fluid intelligence, they relate the new concept to things they have already learned. That works just fine as long as they can make a connection to something they know - and the connection is appropriate.

Problem: No Connection to Life Experience
The problem occurs when either (a) they can't make a connection because the material being presented is so oblique or (b) the connection they make is inappropriate, essentially comparing apples to oranges.

A classic example is asset allocation. The material as it is usually presented is too oblique for many older investors; they simply cannot relate it to anything they already know. Therefore, they don't really learn it. Therefore, they can't act on it. Therefore, there is no sale.

More generally, material filled with charts and numbers are guaranteed to lose many older investors because they can't make appropriate connections and they can't process it using fluid intelligence.

Of course, not all older adults have problems processing complex new material. Einstein still could well into his 80s, although not nearly as well as when he was younger. But how many Einsteins are you dealing with? And how do you know whether any specific older adult can or cannot process the material you are providing? They don't wear signs.

The only action that makes any practical sense is to assume the older adults you market to are like older adults in general: their fluid intelligence has declined so markedly that if they must use it to comprehend your communications, they won't get your explanation accurately, completely or quickly. If that is true, then the only other action that makes any practical sense is to help them use their crystallized intelligence - their life experience - to grasp what you are trying to say.

The mistake most financial marketing makes is to assume the reason older consumers don't say "yes" is that they reject the offer. In fact, an awful lot of the time, they simply don't understand it.

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