In Denmark, only 4% of the population have registered as organ donors. However, in Sweden, 86% of the population have registered as donors. Why is there such a large difference between two countries that are arguably culturally similar?
It turns out that the difference is simply because of how the car registration form is designed. In Denmark you have to opt-in to be an organ donor i.e. tick the box to become a donor. However, in Sweden you have opt-out i.e. tick the box if you do not want to be a donor. This is one of the examples that Dan Ariely cites in his TED talk called “Are we in control of our own decisions?” (Google it).
This and other studies demonstrate that when people are faced with complex decisions that they care about, they will often pick the easiest solution. That is, if there is a default choice – a choice that is made for them, most people will pick that.
There are many reasons that drive people to use mortgage brokers and assistance with selecting the mortgage product and lender is one of them. This research suggests that giving your clients choices might actually make them feel more uncomfortable. This is not a new idea. It is generally accepted that people want leadership from their advisers. They want confidence. They want authority. They want genuine care. They want you to make a complex and important decision easy.
Therefore, if your sales process involves presenting multiple choices to a client and asking them to choose the one they feel most comfortable with, you might consider changing this. It is your job, as the mortgage broker, to make the decision. You need to get to know your client, their needs, their requirements and whatever else is important so that you are ultimately in the position where you can look the client in the eye and say “this is the best solution for you”.
But it's not just about the decision
But it’s not only about making the decision for your client, is it? In fact, if that is your value proposition, be concerned. IBM’s artificially intelligent supercomputer, Watson (in 2011 Watson competed on the US quiz show Jeopardy! against former winners and won the first place prize of $1 million – ask it any question in the world and it will find the answer) is now being used by oncologists to develop treatment plans. It can do work that would take teams of doctors many decades to complete (reviewing studies and other patient cases) in a matter of hours. IBM has announced that Watson will generate $10bn in revenue in 10 years. In the near future, a computer will be making loan recommendations.
That said, I don’t believe that computers will totally replace humans. Most humans will want to look another human in the eye and ask “is this right for me?” Humans are reluctant to trust computers. They are reluctant to trust brands. Humans are hard-wired to trust other humans. This is your core job as a mortgage broker i.e. to develop trust and a relationship with your client. I believe that asking a client to make a choice actually hinders the process of building trust with a client. When you provide choices, you are really just positioning yourself as an information provider, not a trusted adviser.
How do you do it?
Of course, ‘choice’ is still an important feature of the mortgage broker industry. That a client can come to you and you can select from 30-plus lenders gives your client comfort that you will have a product that suits their circumstances. So advertising that we provide choice is still important. However, when it comes to providing advice and making recommendations there are a few things you can do – pick the one that you think suits the client the best:
Present up to three options (lenders/product), compare them and then make your recommendation. When making the recommendation, be very sure you do it confidently and give only one to three reasons as to why that is the best solution (research suggests you should not give more than three reasons).
Present only one solution but describe the process you undertook to arrive at that recommendation e.g. you took time to understand their needs and you compared 1,000-plus products that fitted it. The top three lenders were X, Y and Z and for these reasons, X is the best. One warning with this approach – people assess value by comparison. So if you tell someone that they have a 1% interest rate discount – if they have nothing to compare it to, how will they know if it’s a good deal or not? Presenting only one option might make it difficult for them to compare value. But this approach probably best suits clients you have a good, trusted relationship with.
Present up to three options but make the decision for them. That is, you might say that for these reasons ‘X’ lender is the best for their circumstances and “unless they have any concerns with this recommendation, you will assume that they are comfortable with it and will go ahead and prepare the application”.
There is a big difference between offering your clients choice and making (or letting) them choose. You must offer your clients a wide choice of lenders – virtually all brokers do. But this does not mean you should leave the client to make their own choice or ask them to. This is your job as a trusted adviser. And there’s plenty of research that suggests clients want you to do this, too.
This is a slightly amended version of an article written by experienced mortgage adviser Stuart Wemyss, for our sister title Mortgage Professional America. It has been shortened to make it suitable for web publishing.