Five Rules for Selling Equity Products
In a Tough Environment

By Dick Ross

If you want to sell equity products to graying investors when the markets aren't co-operating, you need to rethink your approach. After 20 years of bull markets, most advisors are still implicitly, if unconsciously, selling "don't miss the boat, the market is going to go up." It doesn't work with those older investors who are more concerned with the return of their capital than the return on their capital.

There are five rules to keep in mind. Applying them when talking with graying investors will lift equity product sales.

First, focus on the long run. Find a need that is explicitly, obviously, so far in the future that what happens in the market tomorrow is largely irrelevant. What kind of need is that? Possibly, " your grandchildren's college education." Or, "having enough money to pay for the higher medical expenses that occur when people are age 75 and over," or similar concerns that are psychologically discrete in graying investors' minds.

Second, focus on the need itself. Don't invent it. Don't assume you know what the prospect's needs are. Find out about his or her hopes, dreams and concerns in 15 or 20 years. Then zero in on one that can be psychologically separated from on-going investing and saving. It must be distinct, such as grandchildren's education or paying for medical bills. It usually can't be simply "having enough money when you are older" because that is why graying prospects don't want to invest now. They are concerned with loss. If there is more than one such need, deal with them in separate conversations unless they obviously tie together or the same product solution ties them together. While the needs we are talking about may be smaller than a more encompassing need, such "save for retirement," there are two things to be said in their defense: (1) Working with them is typically a more certain route to a sale, and (2) Capturing the prospect or maintaining a relationship with a client will result in more business down the road.

Third, help the prospect use his own life experience to both comprehend and evaluate your sales argument. See "The E =MC2 of Financial Sales" for more on this. For example, instead of showing an Ibbotson chart on the market's performance over time, you might ask what the prospect was doing 20 years ago. Let him talk about that for awhile, refreshing his own memory of those times. Ask how he personally has done economically over that 20 years and how the U.S. economy has done in that time. Then ask whether he was invested in the stock market at that time.

• If the answer is "yes," ask how well his stock market investments did over the past 20 years. The answer should be he did very well. Then, connect the answer to the performance of the U.S. economy and the increase in house prices over that time, as well.
• If the answer is "no," say, "you know, 20 years ago most people weren't invested in the stock market, but did you know that the Dow (The Dow Jones Industrial Average) is about 5 times higher today than it was then? That's like buying a home for $100,000 that now is worth $500,000." Then connect both the Dow's increase and the increase in house prices to the performance of the U.S. economy.
• Now you are in a position to say, "in 15 or 20 years the U.S. economy will be a lot bigger than it is now, so it seems reasonable to believe both house prices and the stock market will be higher, too, like what occurred over the last 20 years that you have personally lived through and experienced."

Fourth, find the catalyst for action. The catalyst is a hot button that drives immediate behavior. For example, if someone has indicated a need to help fund a grandchild's college education, the trigger may be the age of the grandchild. With a new grandchild: "with 18 years before your new grandchild needs money for college, it takes only $20,000 invested now to turn into about $90,000 when he's ready if the stock market grows at its historical average. But if you wait for even a few years, the market has to do a lot better than its historical average to get to that $90,000. Why would you want to make it harder for yourself to make sure your grandchild has enough money for college?" The catalyst is the feeling of obligation on the part of the grandparent combined with the cost of waiting. Neither may be sufficient by itself to produce action.

Fifth, offer a choice. For example, "there are two ways to get to the $90,000; you can invest $20,000 now or you can Dollar Cost Average the investment over the next 12 months." Or, "you can invest the $20,000 as we talked about or you can invest a little less today and a little more over the next few years - for instance, you can invest $10,000 today and then another $6,000 in each of the next two years in order to be on track for the $90,000 in 18 years."

If you apply the rules on a regular basis, you will become proficient at handling all sorts of different situations. It will become easier and easier and you will get more equity product sales as conversations with graying investors become more and more productive.

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