Investment Funds as a Door Opener: Building Client Relationships in a Low-Interest Era

In today's financial landscape, where traditional products like car insurance no longer reliably open doors to new client relationships, what can advisors use instead? According to Carsten Walendy, an experienced insurance and financial broker, the answer is clear: investment funds. In an exclusive interview, Walendy explains why funds are an ideal entry point, how advisors can avoid common pitfalls, and the critical role of financial education in growing the investment market.

Why Funds Are the New "Door Opener"

Versicherungsbote: To what extent can investment funds be a door opener in client acquisition?

"Once upon a time..." so fairy tales used to begin. But reality in our business looks quite different now. What once served as a door opener for clients—the good old car insurance—no longer works effectively, or only to a limited extent in the age of online portals.

It's therefore obvious, and I speak from years of practical experience, to choose a different form of client approach. In times of zero-interest policy, my colleagues and I are meeting open doors with investors.

People don't talk about money, and yet most have a big problem: Where can I still get something for my money? Is it even still sensible to save or invest money with an insurance company or bank? And anyway, prices have risen extremely in recent years, so the stock market must crash soon! Or not!?

Funds are ideally suited as a door opener, even as an entry into a new client relationship. For example, the investment of asset-building allowances as a foundation for future wealth for every apprentice, worker, or employee. Or a junior depot free of fees until the age of 18. This way, the youngest can make very positive experiences from the start and thus take their first steps towards sensible investment in investment funds.

Is the Topic of Funds Too Complicated for Advisors?

Is the topic of funds too complicated for intermediaries?

Let's put it this way: The topic of investment, here exclusively open-ended funds, is not something you learn and convey on the side. It involves more than just knowing basic key data about how funds, the stock market, and economic or political impacts work. Tax and legal aspects must also be considered for the investor.

Furthermore, it is essential for intermediaries to regularly engage with fundamental key figures, scrutinize the fund universe, and know the peculiarities of individual funds and the people behind them.

I don't need to have the entire market permanently on the agenda, but an intermediary should consider a fund spectrum of 20 to 50 investor-suitable funds. Here, too, there is no "best" fund. It is more important to understand when and why a specific fund concept works. As an intermediary, I must accept that no concept works in every market phase. Then the client's wish is decisive. For how long—short, medium, or long-term—does the investor want to invest their money and with what risk-return profile? How should certain funds be combined for the investor, also considering the client's wishes? Money investment always has something to do with trust. This asset I have to earn as an intermediary. Success then inevitably comes on its own.

Consultation Approach: Transparency Over Fear

In the distribution of insurance, intermediaries often play on the customer's fear. What consultation approach do you see for investments?

Part of serious consultation is to inform "about risks and side effects." In the past, there was a risk-free interest rate; today, there is interest-free risk! All forms of investment in funds, whether equity, bond, mixed, or real estate funds, are associated with fluctuations. The stock market is not a one-way street that only goes up. In the worst case, there can be a crash, and that can become uncomfortable temporarily.

I try to take away this fear from inexperienced new customers by not only showing the profit possibilities. As required by law, I address the customer's risk willingness and risk capacity individually. Whether it's a small saver with 50 euros monthly or an investor with, for example, a six-figure sum.

Reaching Diverse Target Groups

Which target groups can intermediaries reach with funds?

My maxim is: "Everyone needs a depot!" From a junior depot starting at birth with a real chance of becoming a millionaire, to the older generation, where either topping up one's own pension or, typically, passing on what has been earned to the next generation is the focus. Investment, like insurance, requires active outreach. In times of ever-increasing regulation—not to say coercion, bank closures, etc.—many feel overwhelmed and abandoned and are glad if someone picks them up and advises them in this situation.

Common Mistakes Advisors Make

Where do you see mistakes frequently made by intermediaries on this topic?

I'll mention mistakes that I, too, have made in the past. At the beginning, as an intermediary, one might be inclined to overestimate oneself. Lack of fundamental knowledge or know-how is the main problem here. Often, the focus is solely on the achieved return in a specific period without questioning how it came about. This is exclusively a retrospective view with no predictive power for the future.

Another—not to be underestimated—problem is phases of correction that can occur after a short time. Many intermediaries then practice an ostrich policy, even though the customer needs professional advice precisely then. A phone call or a self-written newsletter in such situations often works wonders. We have made very positive experiences that investors in such phases even want to buy more, provided the financial means allow it.

The Hindrance of Financial Illiteracy

Does lack of financial education hinder fund distribution?

Lack of financial education is our societal problem. An improvement is not discernible from my perspective, nor is it desired. Politics has failed to set the course for the future in such a way that investments in the economy are attractive for all. Misguided incentives following the scattergun approach, tax changes that are no longer or only hardly comprehensible, etc. Instead, all actors are restricted in their daily work by excessive and disproportionate regulations.

Another aspect is that the investment business can indeed be a tedious business at first glance. Many intermediaries think it is not financially worthwhile because with normal installment savings plans, there is still a lot of month left at the end of the money. Here, especially insurance intermediaries can counteract and lay a foundation for continuously increasing income with asset holdings. It takes several years until a sufficient volume of assets is reached and the intermediary also financially reaps the fruits of their labor.

Therefore, honest advice to intermediaries who want to expand their investment business or who don't yet have a 34f license. Especially in times of zero-interest policy, we have the chance to profile ourselves and expand and solidify existing client relationships. In my experience, customers in the investment area very often give better recommendations. And those who still don't want to do it themselves should look for colleagues who run this business and form alliances.

For my part, I wish that Germany would become a country of shareholders in the future. That prosperity for all is no longer empty phrases but the expression and reward of smart investments in the economy. The best solution for private investors here is the actively managed equity fund.

Questions asked by Jenny Müller