The judicious use of incentives 

With the aging process, comes the tendency to reminisce.  You can fight it as much as you can, but the inexorable process of turning into your mum or dad has the upper hand, and reminisce you do.

The other day, a random memory popped into my head, a propos of nothing.  I recalled a previous existence, working back in the late 1980s for NPI, the specialist pension provider.  It was Christmas and I, like my opposite numbers representing competitors, were doing the rounds of our supporting firms, doling out the usual Christmas freebies.  In my case, the freebie was a glossy calendar, full of pictures of red squirrels.  And it was gift-wrapped.  NPI certainly knew how to wow their intermediaries.

During the course of the day in question, I began to spot a trend.  By some twist of fate, I was managing to call upon my brokers a little time after the chap from Clerical Medical had been there.  On each visit, I'd notice the evidence of his largesse - a nice box of cigars, or a rather tasty-looking single malt, displayed proudly on the desk of the recipient.  Each time, my contact would thank me politely for the calendar, and dump it on the back of a filing cabinet.  I don't think I ever saw one of these items hanging up in the next year, and neither did I see remotely as much business as the chap from Clerical Medical did.  At the time, Clerical had more expensive and less flexible pension contracts, their admin was woeful and they certainly didn't have NPI's consistency of performance - so it is difficult to imagine that the motivating factor was either a hand-made cuban cigar or the peaty undertones from a glass of Laphroaig.

Of course, I am describing a different era.  Many IFAs often did whatever they wanted to do, and got away with it.  The fact is that, incomprehensibly, a squirrel-infested calendar did not switch intermediaries onto wholesale support for NPI, whereas cancer-boosting comestibles somehow did make a profound difference.  The fact is that certain incentives do make a difference.  It might not just be the incentive itself, but how they are used - but people do respond to incentives.  We might not altogether like the fact, especially when we consider that we have a superior product or service anyway, but incentivising people to take action (and hopefully the right kind of action) seems to make sense, especially when we our business is about selling intangibles.

From a professional perspective, there needs to be a clear dividing line between incentives, and bribes.  The former are simply good reasons to do the right thing.  The latter represent techniques to bias a person towards a course of action that is not necessarily in their own best interests.  Whilst it would be unhelpful to come over all legalistic and prescriptive, this is clearly an issue on which professional advisers need to take a view.  The following kinds of emphasis do, I think quite legitimately, fall into the acceptable category:
  • making it very easy for potential customers to deal with you - points of contact, ease of access, even a quick and simple means of registering an enquiry
  • avoiding the creation of unnecessary barriers to advice - so that a person with a pressing financial doesn't need to feel that they are somehow subpar, compared with an idealised target market of (say) already monied investors who didn't need your help to get where they are
  • the provision of certain kinds of service which may supply a kind of 'easy in' to your more ambitious service offerings (CashCalc's quick cashflow might be a good example)
  • added-value services - such as free (to clients) 'how to' guides, or seminars
  • no charge for the initial meeting (which is not the same thing at as 'free')
  • free consolidated valuation reports - such as may now be facilitated using our backoffice technology
  • thank-you gifts for client referrals (we can confirm that rewards programmes do work)
  • a free Will for financial-planning clients
  • money-back guarantee (worth thinking about)
Kevin Moss, 16/11/2017