The truth: Your new standard of care in financial services, Pt. 3

By Steven McCarty

The problem with fear mongering? It’s an anemic sales tactic and the lowest form of selling.

Editor's note: This is the third article in a series focused on truth in selling. Here is part one and part two.

When asked whether fear or greed was the stronger human motivator, famed investor Warren Buffet answered unequivocally: “There is no comparison between fear and greed. Greed is slower. Fear is instant, pervasive, and intense.”

No wonder many agents use fear to close sales. And why not? Consumers should be afraid of running out of money in retirement or leaving their spouse penniless when they die. By making fear explicit, advisors help clients take needed steps to enhance their financial security.

But here’s the problem. Many agents begin spreading lies about Social Security, Medicare, or FDIC insurance, including these three FDIC falsehoods advisors used to move prospects from CDs into annuities:

Misrepresentation No. 1: The most a consumer can have insured is $250,000.

Fact: The $250,000 limit is per insured bank, for each account type. So consumers can have more than $250,000 in protection if they have multiple account types in several banks.

Misrepresentation No. 2: If a bank fails, the FDIC could take up to 99 years to reimburse depositors.

Fact: Federal law requires the FDIC to remit the insured’s deposits “as soon as possible” after an insured bank fails. This usually happens within a few days, not years.

Misrepresentation No. 3: The FDIC only pays a fixed amount per dollar in each insured account.

Fact: Federal law requires the FDIC to pay 100 percent of insured deposits, up to the federal limit, including principal and interest.

The problem with fear mongering? It’s an anemic sales tactic and the lowest form of selling. Here’s why: Highlighting the benefits of a product makes customers really want to buy. People who buy out of fear feel they have been forced to buy. When weak agents resort to this tactic, their sales lack depth and staying power, resulting in “buyers remorse.”

Think about it. What happens when an advisor lies to a prospect about the FDIC (or other government program)? The prospect is overcome with fear and forgets about the benefits of the product. So he goes to the bank to withdraw the money, but can’t defend his purchase to the bank customer-service rep. Then, he learns from the rep that everything the advisor told him about the FDIC was wrong. Whoops. Good-bye sale, so long credibility, and see you later reputation.

Wouldn’t you rather be an advisor who sells from a position of strength? Here’s how to become one:
  • Use fear constructively in order to assess and neutralize legitimate risks.

  • But never make false statements about government benefits just to make a sale. It’s unethical, inhumane, and wrong.

  • Instead, become an expert on government programs so you can proactively educate clients about the program’s weaknesses and help them take protective steps.

  • Finally, don’t just position yourself for your next sale. Do what’s required to survive long term in this business: sell truthfully!