Greed, Trust, and Bad Marriages: Sales of Investment Products via Insurance Agents

"Marriages are made in heaven and executed on earth." Well said.

Just like any street-smart young man eyeing a bride who is successful and has assets that make him feel secure about their future, businesses often fall into the trap of eyeing lucrative partnerships. Throughout my career as a consultant, I’ve encountered numerous businesses with investment products like equity, PMS, investment-grade real estate, and fractional real estate investments, that get attracted to insurance agents. "Come on, Dr. Praveen, let’s team up with the insurance agents, the billion-dollar club agents, or other networks of insurance agents and push our products," they often say. The common rationale is that insurance agents earn less on insurance products, so they would be keen to promote higher-commission investment products.

While this narrative sounds fantastic, it often ends in disaster. The reason lies in the fundamental misunderstanding of such partnerships. Investment product companies, whether financial or real estate, tend to eye the network of these brokers without understanding two crucial aspects:

1. Consultative Sales and Risk-Free Nature: Insurance sales are consultative, largely risk-free, and rely heavily on the relationship between the agent and their customer. Insurance, by nature, is a risk-free product and not an investment product. The objective of buying insurance is fundamentally different.

2. Risk and Mindset Differences: Investment-grade products, whether financial or fractional real estate, are inherently risky. They require a different mindset and approach when negotiating sales with customers. The customer buys insurance products based on trust, and the entire network of an insurance agent is built on referrals and a closed network of selling.

What happens if an investment product sold by an insurance agent fails? The insurance agent’s reputation and primary business suffer. This has happened in the past with many equity and real estate products that insurance agents sold, leading to numerous case studies often titled "Failed Marriages in Business."

It’s like marrying someone who seems attractive and valuable, but whose strengths and nature are not compatible, leading to a failed marriage. Despite this, why do insurance broker networks or aggregators still push such products? The answer is simple: Greed. Companies offering these tie-ups promise fancy commissions to everyone involved. Some agents take the bait and suffer, becoming case studies themselves, while most experienced agents know better and steer clear, understanding that greed is dangerous.

I have witnessed the failure of partnerships between insurance agents and companies offering investment products on three separate occasions. Based on my experience, I can confidently say that these attempts are recipes for disaster.

On the other hand, I have found success in selling investment products through people or companies engaged in distributing such products. For instance, I recently collaborated with Hbits, one of the leading commercial fractional real estate investment platforms. We strategically tapped into mutual fund distributor networks, equity market consultants, and broker networks. The results were astounding: over 30 Cr of fractional real estate sales in 25 days with just a five-member inside sales team with PMS backgrounds.

Why did this work? Simple. Investment inherently involves risk, and in the equity market, a 12% return is considered good. However, with fractional real estate or REITs, the customer may get a return of 9-12%, but the risk is lower than in equity markets. For the partners, this was advantageous because they don’t earn much from distributing mutual funds or advising on equity. Hence, this partnership had better chances of success and indeed succeeded.

So, to all business and sales managers or corporate strategists considering such partnerships, beware of the consequences. It’s a disaster waiting to happen.

The Worst Question a Salesperson Could Ever Ask

 

The Worst Question a Salesperson Could Ever Ask

 

As a salesman who has sold anything and everything, I can lay my hands on for over 20 years, I have been in situation where I am interacting with customers or salesman or promoters on how to sell a particular product or service, I have read several hundred books and untold numbers of articles on selling. One thing that frustrates me is how often BAD advice is passed along that hurts the prospect more than it helps. I recently was associated with a company in real-estate, I witnessed a situation where where the promoter was trying educate the sales rep on the importance of better understanding the prospect need while involving their spouses in their buying process, before even initiating the sales conversation. 

What in fact is more important, in my opinion, is qualifying a prospective client thoroughly enough to have determined that there "is" a viable sales opportunity? Before probing the spouse’s interest. A lead who is enquiring about your product or services is primary target who needs convincing before he takes it to others for qualifying his decision, In high value sales the focus should be on understanding the prospect and the steps involved in their buying process. We must learn, however, to ask questions regarding their buying process without alienating the very people we are trying to build a trust-based relationship with.

 The promoter of the real-estate company went further with his training and said "Here's a question we should always ask the customer. Is anyone else besides yourself who will be involved with this purchasing decision?" That may work great in a book or a training seminar, but it doesn't cut it in real life. I've seen so many sales rep making this mistake, they get to the point where they ask, "Who's the final decision maker?" The problem is that a question such as this sets your potential client on the defensive. Their response usually is, "I'm the only person you need to worry about." We might as well have said, "You are not powerful enough to make this decision yourself. So, who am I supposed to talk to who matters?"

Over the years, I have developed quite a pet peeve about the use of the term "decision maker." Any time you deal with multiple people who are involved in a buying process, they all seem to think (or perhaps they need to think) that whatever portion of the overall buying process they are responsible for is THE decision. The technical approver is making the technical decision. The financial decider is making the financial decision. The purchasing agent is making the buying decision. Or so they must think. Whether the individual you are interacting with is, in fact, the last decider, or they're merely a recommender (i.e., making a preliminary selection to recommend to his or her superior) they almost always think that they are making THE decision We should let whoever we work with feel they are the decision maker. But do learn what has to occur throughout the rest of the buying process as well.

 An improved question for your client is, "Once you make your decision. What happens then?" If they say, "I'm the final decision maker." Respond with, "Excellent! What else will have to occur before you decide?" Once you have a grasp on their process, then inquire, "When you decide what happens then?" That last question usually discloses who and what else is entailed.

 Everyone who is a part of your customer's buying process holds importance. Any one of them could mean the difference between closing the deal or not. Try to understand the different people who play a part in the process and try to meet, or at least speak on the phone with, as many players as possible. But make sure to ask your 'who' and 'what' questions in such a way that you show due respect to the role of each individual and their contribution to the overall decision-making process.