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Pledged-asset loans: An innovative approach to home financing
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 [email protected].
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