Grumble, grumble, grumble. I hear a lot of that lately. "What can we do about the yearly hassles of benefit restructuring and price shopping?" The never ending cost-benefits battle has been raging since the new millennium. It seems every time that a renewal comes in the increase is in double digits...and the benefits have been cut or modified to control utilization.
The fact is, however, that right now we have the greatest opportunity in our short history to really start to take control of the situation and do something constructive. And, in the process, dramatically increase our revenue. The opportunity lies not in piecing together re-structured product arrangements but to start to work on some of the root problems and then selling products to solve them. This means not only dealing with the employer but addressing employee needs as well.
In my article in the March issue, I posed the question, "Who is our client? Is it the employer, the employee or both?" I dare say that most of us would answer "both". In fact, if you don't feel the employee is an equally important client you are leaving a lot of revenue on the table and running the risk of being replaced. The reason,...radical price changes induce price shopping which can open the door to competition. If the competitor is ready and able to deal more effectively with employer and employee needs, you are likely to lose the client.
To combat what is happening in our industry, we must take a broad based approach to the market and start to develop long range strategic benefit plans for our clients. Last month's article on change and what it really means identified the value of focusing on needs assessment and problem solving. You might say that it was a "blueprint" for developing a consultative benefits practice. In future articles I will be offering detailed information on things you, as a broker, can do to begin to deal more consultatively with your clients and prospects.
My intent, in this and future articles, is not to disparage the traditional marketing strategy, it will always have its' place. The intent is to offer another alternative that can be innovative, creative, challenging and very lucrative. This, I think, is the key to attracting bright new talent into our industry. And make no mistake about it if we don't attract new people into the industry, we are still doomed to a slow death from attrition and apathy regardless of any legislation.
One quick question before we continue. What is it that differentiates you from the competition? Think about it for a minute......If your answer is SERVICE and/or TECHNOLOGY SUPPORT, you are right there with a majority of the other brokers. If, however, the majority of brokers make the same claim, it isn't much of a differentiator is it?
I am not trying to minimize the importance of service and technology. The fact is no matter what the differentiator, you will never keep the client if you don't do a good job of serving their needs. With a consultative strategy, the differentiator is something that only the broker providing it can give. That differentiator is "INTELLECTUAL CAPITAL". No one else can bring your level of expertise and creativity to the table. Once that is established, as long as you have a good service support system, you will not lose a client to the competition and your closing ratio will skyrocket.
One other thing before I continue. If you are new in the business or still actively seeking new clients, keeping activity records is crucial to your success. Without a "scorecard" to keep you focused and motivated it is easy to fall into a sales slump. Keeping an activity record can help you head off problems before they occur and help drive new sales. I have been in the business for more than 33 years and I still do it to keep myself on track and focused. You can also use it to help redirect your efforts to focus on a more consultative sales approach. You can download a copy of my Activity Record form from my website under the "Broker" tab. Feel free to put in your own headings and set your own activity goals.
Now, let's deal in more detail with the first step in a consultative practice and some of the common "pitfalls" brokers fall into. I should mention that it has been my experience that the pitfalls are more of a problem to veteran brokers than those with just a year or two in the business. The reason is that they have a much greater tendency to fall back into "tried and true" selling habits. For a veteran broker, a product related question is an opportunity to "wow" the prospect with their product knowledge and service expertise. This can be a fatal mistake if they are in competition with a good consultative broker.
WHAT ARE SOME OF THE PITFALLS TO CONSULTATIVE SALES?
Product Presentation – What I mean by this is the temptation to fall back into the comfort of the spreadsheet. When a question arises about something like, say HSA's and CDHPs. It is very easy to drop into a presentation on how HSAs work and compatible products. As a consultant you must control the process. It is only appropriate to address solutions after the problems have been clearly identified and assessed. Being drawn into a detailed product discussion before you know the employers' objectives and current plan benefits can put you at a disadvantage in a competitive situation.
Technical Ineptitude – some that have been brokers for 20, 30 even 40 years have really only been in the business 1 year 20, 30 or 40 times. They are doing the same things and selling the same way they did after their first year in the business. The consultative broker, on the other hand, will have been in the business one time 20, 30 or 40 years, growing their knowledge base every year. As a result, a consultative broker with 2-3 years in the business will have a competitive advantage over the first broker no matter how long they may have been in the business.
We have all heard the axiom "Knowledge is power", NOT TRUE! If that were true, educators would hold all the power cards. The true axiom is "APPLICATION of knowledge is power". To be successful we must stay current with all the technical, legal and IRS changes and then apply that knowledge to solve client problems.
Continuing education takes more than just getting a "designation" though that is an excellent starting point. It takes constant effort! Seminars, workshops, study groups, subscribing to and reading technical updates (one of the best is the NAHU Newswire). Which brings me to a rhetorical question...how many of us, in our quest to get our required Continuing Education, find the cheapest course and usually one that we already know a lot about? Take a moment to think about that.
Analysis Paralysis (AKA Fear of Liability) – We tend to hide under a protective veil of legal and tax liability fears. "I am not an accountant or attorney, so I don't get involved with that." It is true, we are not accountants or attorneys and we should not try to practice law or accountancy. We certainly can diagnosis and refer accordingly. The reality is, on many occasions, I have been asked by CPAs and attorneys for my input on tax and legal issues for matters pertaining to health and welfare benefits. Answers for which they will charge their clients. Of course my assessment refers the CPA or attorney to specific site references that they can use to research the answer more thoroughly.
GETTING TO THE DECISION-MAKER IS KEY TO CONSULTATIVE SELLING
In the consultative sales process we must first and foremost understand who the decision maker is. So....who is the decision maker? Don't look before you answer! (see the end of the article). Well, did you get it right? If your access point is not the decision-maker, a sound multi-step consultative procedure can help you get there. This is the question that commonly comes up. "Why can't I make the sale to the HR Director? He/she is the one that signed the Broker of Record (BOR) letter when I took over the case."
Human Resources personnel are not involved in the financial decision making process of the company. As long as the only thing the employer is looking at is a cost/benefit comparison the HR person has great influence on the product selection and the broker of record. If, however, a consultative broker gets the ear of the CFO or CEO, they will likely have the advantage. With strategic planning, they will be able to show the client how to control cost and save money, without cutting benefits. And, in many cases eliminate compliance risks not dealt with by their current broker.
Lets suppose that a competitor gets access to the CEO of one of your clients, perhaps through their Financial Planner or CPA who has a strong client relationship. Or, maybe the HR Director is asked by the CFO to get competitive quotes from several brokers because of radical rate changes. If the new broker is also product driven and spreadsheet oriented, you have a distinct advantage. You have given excellent service to HR and maybe even provide sophisticated HRIS software services. You also have a strong relationship with the client.
If, on the other hand, the new broker is consultative it is likely there are a number of significant advantages that they will have. The consultative broker will assess employer risk exposure (COBRA, Section 125 compliance, HIPAA, etc.). They will explore cost control mechanisms such as integrating CDHC plans, HSAs and/or HRAs and FSAs with a "defined contribution" payment structure to provide cost saving strategies that will have long-range benefits. Finally, they will look at the impact of benefits on recruitment and retention. Then you will be at a distinct disadvantage. While you are talking about the benefits of a CDHC linked to an HSA and showing the bells buzzers and whistles of the product the consultative broker will be discussing how to develop a multi-year strategic plan to achieve employer benefit objectives more effectively. Not only will the new broker have the decision-makers ear, it will only take about 30 minutes for them to present their case and make the sale. Many times this can be done without ever showing a spreadsheet. It is a concept sale.
STEP ONE OF CONSULTATIVE SELLING – PROBLEM IDENTIFICATION AND UNCOVERING NEW OPPORTUNITIES
In the balance of this article, I will focus on what needs to be done to set the stage for the consultative sale. With a multiple step consultative sales process, you will also find it easier to work "upstream" if your initial contact happens to be with Human Resources. Remember, HR cannot make a decision on a proposal that requires a financial decision. OOPS, they can say NO.
Fact-finding is critical to problem identification and finding new opportunities. This is the place that most brokers making an effort to sell consultatively fail. When questions arise about product issues the natural tendency is to answer them. Thus, when a prospect asks about HSAs or some other benefit-specific question, the tendency is to fall right into the "product presentation" trap and begin discussing solutions. Solutions before the problems are identified.
To avoid this pitfall and stay on track, the best option is to defer answering the question. A response like "That's a good question but it's getting the cart before the horse, first we need to get more detailed information to understand how that might work for your company. Does that make sense?" If they persist, be brief with the answer and get back to completing the fact finder.
One of the great advantages of a careful fact finding process is, if you run into strong resistance (usually from HR), you can always get a census to complete a product spreadsheet. And, you have some useful information to utilize in preparing your proposal. NOTHING IS LOST.
Fact-finding is difficult to do well. It takes practice. Practice you can do with associates or even a spouse. Rules to abide by are:
1. Keep the initial fact finder short, preferably one to one and a half pages. Once the initial presentation is made you will be given the permission to get all the additional information you need to do a complete analysis of the benefits, including census and payroll information. Remember when a Doctor does a routine physical they only get "vital" information and base any additional testing on those findings.
2. Don't go into lengthy explanations (for years, this was my biggest problem, yup, the "product presentation" trap). Ask the questions, listen to the answers and take good notes. If questions arise defer them or respond with short to-the-point answers and get back to the fact finder. You may even want to hand a copy of the form to the decision maker while you ask the questions.
You should be able to complete a well crafted fact finder (I call mine a "Discovery Form") in about 10 to 15 minutes. That is if you don't get into too much detailed explanation. Remember, at this point the purpose is to get information, not diagnose problems or present solutions (products).
3. Always complete the form in person or on the phone, proper completion requires your personal assistance. It is imperative that the decision maker or whom ever is giving you the information understands its importance. If you e-mail or drop off the form it will usually get shuffled to HR and it may take weeks to get it completed. If that happens you have lost much of your opportunity.
4. Set the appointment for the "Benefit Strategies Proposal" presentation. A comment followed by the request such as: "Mr. CFO, from looking at this information, I am sure there are a number of strategies we can present that will help you achieve your benefits objectives more effectively. When would be a good time for us to get back together to review our findings?" Give yourself five working days in most cases. You don't want them to think that it is too easy (it isn't).
The information that you get in the initial fact finding session should be sufficient to expose compliance risks and assess sales opportunities. This requires sufficient information about the prospects plan design to give a clear picture of current benefits. It does not need to include a census or payroll information, this will be obtained after initial diagnosis. My initial fact-finder (Discovery Form) can be viewed on-line at www.triflexcorp.com/.....
Once you have sufficient information, you are ready to prepare a Benefit Strategies Proposal. The primary purpose of the "Strategies Proposal" is to establish the need for the employer to engage the employees. To develop a benefit partnership that will not only accomplish employer objectives but also meet employee needs more effectively (more on this in another article). This proposal must be distilled into an Executive Summary that is not more than 2 pages in length with lots of white space. The recommendations in the Summary identify strategies that need to be evaluated more carefully with their partner, the employees. A comprehensive Employee Benefits Survey is normally recommended to gain employee feedback and input. The body of the proposal contains all necessary support material, in appropriate sections, to support the recommendations presented in the Executive Summary. Sections may include information on Section 125, COBRA, defined contribution strategy, HRAs or HSAs, etc.
One of the interesting and exciting benefits of utilizing a consultative strategy is that you can get out of the product/premium rut and the exposure to competition that it brings.
The timing for a consultative strategy is also different than a product-driven approach. With the traditional product driven approach, you need to have the renewal rates in hand to compare viable options with the client. With groups of 10 to 50 employees you should allow at least 60 to 90 days to complete the process. For larger groups four to six months may be needed. Groups of 50+ employees may even achieve significant benefit by making mid-year plan modifications. In many cases such plan modifications can save the employer significant money and can be implemented during the plan year without changing the core benefits. I will talk more about these opportunities in future articles.
It is not easy to make complex ideas and concepts simple but that is the job of the consultant. In the traditional spreadsheet approach we present a side-by-side comparison and ask the client to decide. Consultatively, we need to assess employer and employee needs and make recommendations based on our knowledge of what is best. Then we must be ready to defend (sell) those recommendations to the client. If we learn to do that, we will become trusted advisors whose wisdom is respected and recommendations are acted upon. We will also be able to start to deal proactively with the root causes of the healthcare inflation crisis.
Answer to the question: Who is the decision maker? – An owner, CEO, CFO or someone else in a financial management position with the company.