[Blog] Shifting Paradigms

Bonnie Godsman

A paradigm shift is a significant change that occurs when a new and different way replaces the usual way of thinking about or doing something. That shift is occurring today in the financial security profession.¹ To strengthen trust and build consumer confidence in the profession, top-performing leaders are rethinking how they interact with their customers and clients.

There is a long-held belief within the financial security profession that the public holds a less than favorable view of the profession, and research seems to confirm this belief. The 2018 LIMRA Insurance Barometer Study reported that 31% of consumers indicated one of the reasons for not purchasing life insurance is because they don’t trust financial security companies, and 33% said it is because they don’t trust financial security agents.

There is some cause for hope. Recent data sheds a more positive light on public perception of the profession. The 2019 Edelman Trust Barometer indicated that trust in the financial security profession reached its highest level since they began tracking the data in 2012, and the 2020 Edelman Trust Barometer reported that trust in the financial security profession among the US population had reached an all-time high of 61% during the COVID-19 pandemic.

Factors that influence public perceptions

“I’ve always said that perception is more important than reality, and if there’s a difference between the two, the only way you can change perception is for people to understand reality.”

—Finseca Foundation Research Participant

 Still, there is much room for improvement, and more recent reports indicate a slightly downward trend in trust in the profession. Finseca Foundation research identified four factors that financial security professionals believe are negatively influencing public perception of the profession:

1. Confusing language and jargon used in the profession.
2. The transactional sales approach used by many financial security professionals.
3. Consumers’ negative view of commissions.
4. Consumers’ misconceptions about products and the profession.

Confusing language and jargon

“We assume people understand what we’re talking about—that they know how the stock market works, the indexes we’re putting them into or what paid-up additions are. We need to explain to people what we’re doing with their money in common language.”

—Finseca Foundation Research Participant

 One study revealed that 72% of American consumers think the industry uses wording that is difficult to understand.²

Like every profession, financial security has its fair share of jargon. Most financial security professionals know not to use acronyms when speaking with customers. But consumers need more than definitions; they need explanations.

Troy Korsgaden, Principal of Korsgaden Insights, uses stories to help clients understand the need for different products. “You can tell someone that bodily injury coverage is needed if they physically hurt someone, and property damage is needed if they damage someone’s property,” he says. “But that doesn’t make it real for people. I tell them this story to pull it all together:

Imagine a man is driving down the road, and he leans down to grab his coffee. He runs a stop sign and hits a car with three people inside. So, there are a couple of issues. We now have a claim for three people who were injured; that’s bodily injury. There’s a limit for that, and it is X. If there’s more than one person, it’s a total of X. Then, there’s the damage to the car, and he didn’t just hit the car; he also ran into a light post. All these things have to be fixed, and that’s property damage. That’s why you need these different coverages.

“I’ve explained it in a way people can relate to in less than a minute, and then I do the same thing for other coverages,” Korsgaden says.

A transactional sales approach

“There’s pressure in the industry to produce, when we should be providing leadership to our clients.”

—Finseca Foundation Research Participant

 Financial security professionals in Finseca’s research repeatedly spoke of the need for the profession to move from a transactional sales approach to an approach that emphasizes long-term relationships focused on client needs.

“This is something I am passionate about,” Korsgaden says. “People can get the basics online; what they want is a professional partner who can offer expert advice; someone who will guide them as their needs change. Build the relationship first; the sales will follow.”

Finseca research participants pointed out an inherent conflict in the profession. We tell financial security professionals that building relationships is key, but the message to new professionals in many companies is ‘sell, sell, sell,’ and unfortunately contracts and compensation reinforce that behavior. Financial security professionals are measured and rewarded on productivity and sales, not relationship-building, causing some to focus on short-term sales over long-term relationships.

A potential follow-up gap

“The premium clients pay assumes a lifetime of risk, and that means we have a lifetime relationship.”

—Finseca Financial Research Participant

  While most top-performing financial security professionals believe in a lifetime relationship with clients, not everyone holds the same belief. Too often, financial security professionals disappear once the sale is finalized.

Even those professionals who believe they stay in regular contact with their clients may not be doing as much as they think. A 2020 survey commissioned by a large insurance carrier and conducted by Edelman Intelligence indicated a potential gap in the value financial security professionals believe they are bringing to their clients. According to the survey:

• 95% of financial security professionals believe they are always there when their clients need them, but only 79% of customers felt the same.
• 94% of financial security professionals reported they regularly check in with their customers to ensure their policy fits their needs. However, only 69% of customers said they received sufficient check-ins from their agents.

Consumers’ negative views on commissions

“My own father—who knows what I do for a living—considers financial services advisors commission-chasers.”

—Financial Foundation Research Participant

 Commission-based sales may be a prime reason for distrust among the public, and industry leaders caution that we must address it sooner rather than later. “Consumers respond negatively to commissions, not just in our profession, but in any profession where salespeople are compensated through commissions. People are afraid of being taken advantage of. We need a story that better explains how we get paid,” one industry leader warns.

Misconceptions about commission-based compensation may exist in academia as well—even in schools that cater to financial security. Another industry leader in the Finseca Foundation research noted there are approximately 200 schools that offer classes that lead to taking the Certified Financial Professional exam, and many of them do not encourage students to work for companies that base compensation on commissions. “Their idea of a career for graduates is working for a big firm that pays a salary, doing financial planning in a support position. So, even the schools that offer classes in financial services are steering people away from commission jobs,” he says.

Consumers’ misconceptions about products and the profession

“People don’t have a solid understanding of insurance and financial services products. They know they need life insurance, for example, but don’t understand all the options and don’t think they can afford it.”

—Finseca Foundation Research Participant

 The 2021 Insurance Barometer Study conducted by LIMRA and Life Happens identified four widely held misconceptions Americans have about life insurance:

1. Life insurance is too expensive.
2. My workplace life insurance is enough.
3. It is too difficult to buy life insurance.
4. I don’t need life insurance until I am older.

Furthermore, more than half of the consumers who participated in the study indicated they were unsure what products they needed or how much coverage to purchase. The report concludes there is a “need for compelling communications to help consumers build appreciation for the broad value proposition that life insurance offers.”

Leaders in the Finseca Foundation study agreed. “People are intimidated by the process,” one financial security professional commented. “They don’t think they are at a high enough financial level to work with an advisor, and they don’t know how to raise their hands to ask.”

Financial security products are varied and complex. It’s no wonder the average consumer is confused, and many in our research say the industry has been lax in educating them.

The public appears to have as many misconceptions about the financial security profession as they do about its products, which may be one reason it is difficult to attract new people into the profession. For the next generation of financial security professionals, changing perceptions may be as much about image as it is about trust.

Troy Korsgaden sits on the insurance board of Lansing Community College. He has observed that students who come into the college’s insurance program are often surprised at how interesting the program is and are excited by the opportunities. But he says, “Most colleges don’t do a good job of explaining the opportunities, not just in sales but also in STEM fields—actuarial science, big data analysis, artificial intelligence and cybersecurity, for example. There are opportunities for graduates with law degrees and degrees in public relations, communications and business management. Some of the best career opportunities are in the insurance and financial services profession, but we don’t attract people because they don’t know.”

Elevating the profession

“Think of the impact we could have if every financial professional in each marketplace picked an elementary or middle school and taught a financial literacy class.”

—Finseca Foundation Research Participant

 Participants in the Finseca Foundation research felt strongly that trust increases when consumers have an opportunity to work with a financial security professional. Edelman’s data seems to support this belief. Their 2021 Trust Barometer identified a 13-point gap in trust between the informed public and the mass population and a 21-point gap between the general population and employees in the financial security profession.

These findings support the belief expressed by many of the Finseca research participants that a well-informed public will have a more positive view of the profession. The Finseca Foundation identified three strategies for positively influencing public perception of the profession:

1. Creating a collective narrative.
2. Educating the public.
3. Shifting the paradigm within the profession.

Creating a collective narrative

“The general public has no idea of the level of compliance and self-policing we are doing within the industry to ensure their security and safety.”

—Finseca Foundation Research Participant

 Financial security professionals who develop long-term relationships with their clients by providing expert advice and ongoing service can—and do—change people’s perceptions of the profession every day. The challenge is that these changes are happening one client at a time. According to leaders in our research, one of the most significant ways to influence public perception is to create a collective narrative within the profession.

“There’s nothing that promotes the impact of insurance and financial services on society,” one industry leader points out. “You see life insurance commercials, and they’re emotional and well done, but they are individual stories designed to sell life insurance. What about the impact the industry has on a national and global level? People have no idea of the amount of good we do as a profession.”

Educating the public

“The public is not well informed about the industry, and there’s confusion about what financial services means. People see commercials from different companies and hear different thoughts, yet they still don’t know if something like an annuity is good or bad.”

—Finseca Foundation Research Participant

 Many organizations provide educational resources for their clients and customers, but few focus on educating the general public. And those organizations that do offer public education often do so as part of a sales strategy, not for purely educational purposes. Although, momentum may be building. Several leaders in our research said their teams work with schools, businesses and groups such as Junior Achievement to provide financial education.

However, educating consumers may prove more challenging than we expect. LIMRA’s 2021 Insurance Barometer Study notes:

For the industry to educate potential policy buyers, not only does it need to dispel some common myths and misconceptions, it also has other obstacles to overcome. When asked to self-assess knowledge of life insurance, the groups with lower ownership, a higher propensity to believe common myths and that more inaccurately estimated cost believe they have a better understanding of the product.

The first step in educating consumers may be convincing them they “don’t know what they don’t know.

Shifting the paradigm within the profession

“There are three types of financial professionals: transactional, consultative and trusted resource. The majority of financial professionals are transactional. They’re product-focused—I’m here to solve a problem, and here’s the product that will solve the problem. The journey is about educating financial security professionals and consumers on how to get from one level to the next.”

—Finseca Foundation Research Participant

 Consultative, solutions-based, client-focused—Financial security professionals call this approach by different names, but they all boil down to one core belief—the client comes first. Leaders in our study believe that to affect change outside of the profession, we must first change the paradigm within the profession by putting the client first in every interaction.

Finseca Foundation research identified three strategies essential to a client-centered approach:

Deep fact-finding. Deep fact-finding requires going beyond completing a checklist of questions; it requires taking the time to fully understand clients’ needs and goals and their dreams and aspirations. It means asking questions to gather information that clients may not realize is important to their financial security and understanding how their needs may change at different life stages to help them plan for the future.

Expert advice. Clients look to financial security professionals to provide expert advice. They want someone to guide them through the complexities of our industry.

Specialization is one strategy financial security professionals use to provide expert advice. Korsgaden has been a proponent of specialization for many years. “Today’s insurance and financial services products are too complex for any one person to be an expert in all of them,” he says. “Specialization allows you to provide clients with the level of service they deserve and have every right to expect.”

Credentialing can also differentiate financial professionals. “All advisors are not equal,” one leader says, “Someone with a CFP® or other professional designation will inevitably have a certain level of skill that others do not. It sets a standard of excellence.”

Support, Service, and Follow-Up. Support, service and follow-up are perhaps the true test of a client-centered approach. Closing a sale without sufficient follow-up and service strategies in place can turn a potential long-term relationship into a short-term transaction.

A call to action

“We can make a huge change in the business if we start to change our behavior. I believe it is my personal responsibility and the responsibility of my counterparts all over the country and in other firms. Together we can do amazing things.”

—Finseca Foundation Research Participant

 We can do our best to influence public perception of the profession, but we cannot control it. We can, however, control our own actions and behaviors. Elevating the profession in consumers’ eyes will remain a challenge unless we are unified in our commitment to provide financial security for all.

The opportunities for elevating the financial security profession in consumers’ eyes are more than one article can explore. We hope this is just the beginning of larger conversations within your firms and companies.