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Pledged-asset loans: An innovative approach to home financing

National Mortgage Professional
Feb 06, 2007

How to bridge to higher salesKerry Johnson, MBA, Ph.D.sales, leads, bridging, client retention, John has a successful accounting practice. He has great relationships with all of his clients. But he is tired of making a mere $500 per return for tax preparation fees. He wants to talk to his clients about financial planning, but doesnt know how to start a financial planning conversation. Andre is very successful at attracting mortgage prospects and refinancing existing clients. But as rates increase and more adjustable clients move to fixed-rate loans, it becomes harder to make money. Andre would love to talk to his past borrowers about investing their home equity for retirement, but he doesnt know how to start the conversation. Bridging is the answer You have a customer you would like to up-sell. He has a need, but doesnt yet know it. You arent really sure how to approach him. Use bridging. Bridging is a set of techniques you can use to sell your products or services to clients or upgrade them to a higher level or larger quantity. This is particularly important, because not only will they buy from you more quickly than would a cold caller, but there is a high likelihood you will be able to retain them as clients longer, as they buy more products and services. But why worry about up-selling when they have already done business with you in the past? The biggest reason is to keep your client over the long term. The next most important reason is to provide products and services to those who already trust you. According to one study, only 17 percent of mortgage clients will use their last vendor. The biggest reason for this loss of business is the lack of a personal relationship with the client. According to one study done by LIMRA Research: There is a 35 percent client retention rate over five years with one product or service; There is a 56 percent client retention rate over five years with two products or services; and There is a 92 percent client retention rate over five years with three or more products or services. The more products you have with the client, the longer he will stay with you. These products could be a purchase loan, home equity line of credit or even credit service. It could also be an equity management program in partnership with a financial planner. Banks know that as they gain your checking account, they are much closer to gaining your next car loan or certificate of deposit and securing your retirement accounts. Hurt and rescue What is the best way to bridge your clients into more products? First, discover their needs and then move them to other products and services you offer. The method you can use to create this initial interest is a concept called hurt and rescue. Listerine created a brand from the tagline, The taste you love to hate. It tastes bad, so you know it works. But the real hurt was to make you worry about bad breath. If they could do that, you would gargle with Listerine every morning. Listerine marketers, at first, wanted to hurt you and then wanted to rescue you from this fate that causes friends and strangers alike to flee from your presence. Brokers advertise every day, trying to scare homeowners into converting their adjustable-rate mortgages into fixed-rate loans because rates could skyrocket. They offer to rescue prospects from this dilemma with a more stable payment schedule. For example, in selling an equity management approach, very few clients will be looking for a way to better manage their pension fund assets. Most dont look at their fund balance statements and dont know if it is even making any money. If they dont pay attention, they wont have enough money to retire. Only 50 percent of those eligible contribute to their 401K plans, even though employers match the employee contributions. This will give you the opportunity to help them build a retirement account by selling them on investing their equity. But first ask questions, creating a hurt or pain with the person responsible. Here are three examples: 1. Only seven percent of Americans will be able to retire without going back to work at 65. Would it help you if we could prevent that from happening? 2. If you have high equity but cant make your house payments, the lender will foreclose more quickly than if you had no equity. Would it help if we could protect your house? 3. I noticed that you have $18,000 in credit card debt. If we could wipe out a third of that, would that be of benefit? As you ask these questions, your job is to let them know how much of a problem (hurt) their lack of knowledge creates and how you can rescue them from those worries. Here are five steps you can use to bridge your clients into an appointment and help them solve their problems: 1. Make an introductory statement 2. Ask a bridging question 3. Search for needs 4. Trial close 5. Book an appointment Make an introductory statement An example of this is to make a statement that scares or gains the clients attention again using the equity investing approach. The average retirement account only contains $29,000. Ninety-three percent of Americans wont be able to retire without going back to work. Your home equity is just sitting there, not making money. You are paying twice as much tax as you should. You will need 15 times your salary at retirement to live on 80 percent of your earnings. These are all examples of introductory statements. Ask a bridging question These are questions used after the intro statement that brings the concept home to your client. You need to personalize the hurt statement with a query. The average college tuition will be $18,000 a year by the time your kids are ready. At this rate, you wont be able to afford college for your kids when they hit 18. What will you do? You will need 15 times your salary at retirement to live on 80 percent of your earnings. You only have $50,000 saved right now. What plan do you have in place to hit this goal? Your adjustable mortgage could spike to eight percent this year. Do you want to pay that much? Search for needs After you ask the bridging question, try to find out how worried the client is and how much it bothers him. In many cases, clients mistakenly think they are OK with their plans. But they really havent thought about the future enough to make any plans at all. Xerox Research has discovered that if you can get the client to recognize needs, there is a progressive chance that a sale will occur. Here are the stats: If you can uncover one need, there is a 36 percent chance of a sale closing, depending on your skills. If you can uncover two needs, there is a 52 percent chance of a sale. If you can uncover three or more needs, a sale occurs nearly 100 percent of the time. Bridging works because it helps you uncover needs your client may not have thought about. I just bought a new Porsche 911 through my company. My auto insurance agent told me that if I had an accident, the other party could sue my company also, because it owned the car. What plan did I have in place to protect my company from that risk? He then sold me a commercial policy on my auto, which was double the price of a personal auto policy. Trial close These are the money questions. This is where you ask if they would benefit if you could help them. If you can master this stage, your closing rate will be nearly 100 percent. No one will ever say no to you again, because you will only sell what prospects have already told you they wanted. Examples of trial closes are: "If I could help you pay for your kids college tuition without taking out a second mortgage, would that help you? If we could decrease your taxes, would that help you? "If we could invest your home equity with little risk, would that benefit you? If we could help you retire without going back to work, would that be something you would like to look into? Book an appointment If they say yes to your trial close, an appointment is assured. If they say no, go back and ask more questions; you havent probed for needs well enough. Your clients already trust you. You have their attention when you want it. But it is up to you to continually stay in contact and help decrease risk, improve their lives and then solve problems. One of our coaching clients in South Carolina has a tax practice. He calls his clients every three months to check up on them. In addition to his tax practice, he also sells mortgages and retirement planning. His closing rate is 80 percent on every call. Whats the reason? He bridges them to a product he creates a need for. Sure, he hurts and rescues. But mostly, he listens. Your clients would rather buy from you than anyone else. Why force them into other relationships? Keep in contact and listen, and they will stay with you forever. Kerry Johnson, MBA, Ph.D. is a best-selling author, a frequent speaker at mortgage conferences around the world and the founder of the Peak Performance Coaching program. He may be reached at (800) 883-8787 or e-mail kerry@kerryjohnson.com.
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