How to Select an Investment Professional
Consultative-Based Selling Verse
Many of the sales tactics used to sell investments in the past will not
work today. If you study the anatomy of an investment sale today, you
would find a dramatic difference from the investment process of 20 years
ago. The reason these out-of-date tactics are not applicable now is the
sale process has been transformed from a product-orientated sale to a
consultative-based presentation. Let us examine why the process has
changed and how we can select an investment professional with the skills
to match our needs.
The customer is the driving force behind any
fundamental change in the way the investment sales process is conducted.
The most predominant force affecting customer demands is the staggering
amount of information available.
Investors of the 1990’s are inundated with more investment
information in a day than their grandparents were in a lifetime. Investors
can get information from television, radio, newspapers, magazines and the
Before the 1970’s, the average investor was unaware of many of the
investment options required to build a diversified investment portfolio.
As a result of this, many people invested primarily in their homes. Then
in the late 1970’s and early 1980’s, investors demanded higher
returns. Thus, came the birth of transactional and product-based sales.
The statement, “You are only as good as your last trade” became the
customer’s motto to hire and fire brokers.
However, in the 21st
century, investors have turned from products to
consultative-based requirements. The underlying force for this change may
be linked to two factors: the huge amount of investment information
available and the current bull market.
Many individuals don’t take the time to sort through mountains of
information or ever imagined their portfolios would grow as fast as they
have. With multiple information sources and new wealth, investors are
demanding consultative-based guidance to ensure proper diversification and
The Investment Professional: Until recently, investment
professionals (IP) were trained to “get the trade”. Investment firms
set up boiler rooms and bullpens from which brokers made cold calls. The
1980’s gave birth to “cold call cowboys”. Cold call cowboys
telephoned as many investors they could and sold them on yield and
“hot” stocks. If the yield was high enough or the stock good enough,
investors bought. If it was not, they simply waited until the next cowboy
called. As the world moves into the 21st century IP’s must adapt to keep up
With these changes how can investors find investment professionals and
build solid long-term relationships? Here are several suggestions:
Find a professional that is willing to spend the necessary
time to educate you about your investment choices.
Find a professional that offers to review assets not currently
under their management. This expresses their commitment to your overall
Ask them to also provide asset allocation and investment on your 401k,
your child's college fund, etc.
If appropriate, consider fee-based investments. This links
your investment professional's compensation to your asset performance.
Only work with a
professional that offers investment options from many different sources.
Today’s investment professional can offer literally thousands of products
from hundreds of different investment managers and insurance companies. If
an investment professional can only invest your money into products
(annuities, mutual funds, etc.) from their own firm this means they are
usually limited to a few products. This type of product is called an
investment professional can only offer you in-house investments, they may
not be providing you with complete and unbiased investment selection for
the investment professional may also being earning a larger commission by
selling in-house products. Make sure to ask your investment professional
about the range of products they can offer and ask if they earn a larger
commission by selling in-house products.
Find a professional that keeps up-to-date on changes in the
investment industry. This will permit them to offer you new and innovative
solutions to your problem.