How Does Sales Culture Drive Your Financial Rep's Recommendations?

The Sales Culture Motivating Commission-Based Financial Representatives

Understanding the sales culture driving the financial services industry may help you understand the pressure your rep is applying

The sales culture of large investment and insurance companies is very similar to that of Multilevel Marketing companies (MLMs). It includes:

  • The promise of all-expenses-paid vacations and exotic voyages.
  • Weekly, monthly, and annual recognition celebrations at regional and national levels.
  • On-stage glorification of superior performers.
  • Invitations to exclusive groups and outings.

It’s enough to get blood coursing through your veins: you are ready to be on that stage next year; you are ready to break that record!

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Some of the financial-sales industry meetings remind me of a portion of John Oliver’s exposé on MLM organizations.

Insurance and investment companies are not as bad as most multilevel marketing companies (unless they're Primerica… in which case, they are both an MLM and an insurance company), but the sales atmosphere is similar.

Leadership motivates reps through competitions.

  • How many “lives” (that’s what some companies internally call “sales”) did you get last week?
  • What is your premium goal this year (the amount of new money your clients commit to contributing annually to insurance policies)?
  • If you don’t place enough business this quarter, I will put you on probation. Another quarter with subpar production and you’re finished!

Who Does this Motivate?

This high-pressure sales environment works for financial institutions because of their targeted recruitment strategies. They love recent college graduates fresh off campus with no “real world” work experience.

In leadership training at my former firm, they told me this was because a mind straight out of college is much easier to teach: our systems, our products, our ways.

Counterintuitively, candidates with industry experience were least desirable. Management saw them as needing to be “untrained” and then “retrained,” which was substantially more challenging and time-consuming.

Consequently, the ranks of these companies swell with the following avatar:

  • 24 years old
  • Fresh out of college
  • Male
  • Aggressive, competitive personality
  • Likes to have fun!

The meetings often turn into frat parties - they're making money and having a good time doing it!

The ones who are doing well, achieving high sales, are making so much money, they don’t stop to question anything. This is the only reality they know. Those who aren’t as successful are swept up in the competition, ambition, and psychological pressure.

“This is life. It's awesome. This is normal. Who cares if some of the practices occasionally make me uncomfortable? Stop being a baby! These tens of thousands of other reps I see at the annual meetings are doing the same thing I am. How bad could it be?”

The fate of the non-performers

The ones who are not doing well leave the company. The company doesn't care. That's how the process works. Management understands that only a handful in a hundred will be successful long-term, and those will more than compensate for the losers.

The departing reps may have been the company’s best financial planners. But why should management care about that? They were not producers. To these financial institutions, the only benefit of a good planner is if he or she can parlay that skill into producing more sales. If not, the planner may as well leave.

Some of these good planners see the light and go off on their own. They remove themselves from the sales ethos and begin to practice in a fee-only capacity.

Others, however, leave the industry altogether, with a bad taste in their mouth for sales (which they now mistakenly associate with financial planning).

Who cares?

From a business perspective, management and shareholders do not care. The goal of business is to make money. After decades (some more than a century and a half old), the largest financial institutions have solid data on how to drive sales.

They know how to recruit the right salespeople. They know how to train them to sell more. This is their business. They know how to make money.

Unfortunately, this sales culture can have ruinous consequences for the families in their wake.

My former firm

As an aside: for those of you who know where I used to work, I do not seek to damage their good reputation. On the contrary, I think they are one of the classier operations. I believe their sales culture is more agreeable than many others. Perhaps this is a result of their superior products, resulting in a lesser need for questionable sales tactics. That said, the interests of their sales force are still not aligned with the clients they proport to serve.

Takeaways

  • When sales volume is the primary determinant of a reps’ value to her employer, the system is untenable.
  • Consider the potential behind-the-scenes pressures and incentives placed on your financial representative.
  • Choose to work with advisors whose compensation structure allows them to serve you without sales pressure.

Work with advisors whose compensation structure allows them to serve you without sales pressure

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Let me know your thoughts


  • The examples in that video above are pretty extreme. What is your craziest sales meeting experience?
  • Have you worked for an insurance company before (or currently) and experienced those similarities?
  • Companies have to make a profit, and corporate culture can be almost impossible to change. How would you suggest they reform (if at all) their century-old sales practices?

Stephen Spicer

Stephen Spicer, CFP®, AEP®, CLU® is the founder and managing director of Spicer Capital, LLC. He is married to his high school sweetheart, and they have three amazing boys.

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