(October 1999)
When it comes to attracting new clients, nothing is as important for the successful financial advisor as putting in place a plan to maximize referrals.
The reason is quite simple. Despite all of the changes in the competitive landscape, for the foreseeable future referrals will continue to be far and away the most important method used by significant clients in selecting new advisors. In fact, the most recent research on this topic suggests that referrals are critical in seven out of 10 cases in which a serious client selects a new advisor.
The reason for the importance of referrals is quite simple. A referral, in essence, is a transfer of trust. When a client introduces you to a family member or someone they know, the trust and confidence their friend or family member feels toward them is transferred to you.
There are a wide variety of approaches to obtaining referrals. Some advisors see a referral as a happy accident over which they have limited influence. Others view referrals as their due. Still others see referrals as things that need to be extracted from clients, almost like a dentist pulling a tooth, requiring a variety of manipulative tricks and tactics. Whatever the mindset, the approach to asking for referrals is almost always ad hoc and sporadic.
Referrals are too important to your success to be left to chance. Advisors need to replace a haphazard approach with a structured, disciplined and proactive plan.
The following are 10 tips to consider in putting together a plan to maximize client referrals in the next 12 months.
1. Earning the referral
Too many advisors see referrals as something they have a right to expect in exchange for doing a good job for their clients. The reality is that most clients will provide referrals only if they see their advisor as having gone well above and beyond the minimum that they expect – you need to be seen as doing a great job, not just a good job. (The reward for a good job, incidentally, is that the client will continue doing business with you).
You must consider what you’re doing to exceed a client’s expectations so you’ve earned the right to request a referral.
2. Recognize reality
We often talk to advisors who are frustrated because some clients are unwilling to provide referrals, despite having done an absolutely outstanding job for those clients. Advisors need to accept the fact that this is neither their clients’ fault nor is it theirs; it merely reflects the reality that many clients are simply not capable of providing referrals. It’s just something that is not in their comfort zone and probably never will be.
As an advisor, all you can do is accept that fact and focus on those clients who are comfortable introducing you to people who might need your skills.
3. Be specific
Another trap that many advisors fall into is asking for referrals in a way that is too vague: ‘Who do you know who might benefit from my services?’ is an example.
By being specific – ‘Are there any other business owners like you whom I should talk to?’ or ‘Which of your partners at this accounting firm might benefit from the kind of service I provide?’ – you are making it dramatically easier for your client to identify the right individuals and are therefore more likely to see a positive outcome.
4. Reduce risk
The biggest issue that prevents even the most satisfied of clients from providing referrals is the apprehension that their friends or colleagues will feel imposed upon.
In such cases, consider phrasing the question differently. Try: ‘Which of your family members might appreciate receiving an invitation to this upcoming seminar?’ or ‘Which of your business associates might find receiving my newsletter of value?’ By reducing the risk of providing the name, you dramatically increase the likelihood of getting an introduction.
5. Ask for details
One common pitfall is that advisors are so relieved to get the name of someone to contact that they don’t take the little bit of extra time to find out more information – the nature of the relationship, who that client is using for advice right now, any unique or special circumstances, why your client is suggesting them and the kind of personality that they have.
By taking another three minutes to gather that information, you will significantly increase your effectiveness in approaching the name you have been given.
6. Plan your approach
One of the most important aspects of converting a referral into a client relationship is planning how you make your initial approach. That approach obviously will vary with the circumstances. If your client says, ‘My best friend Joe is right now in the process of selecting a new advisor and asked you to give him a call today,’ then clearly the decision about the approach is pretty much made for you.
On the other hand, if your client says, ‘I’m not sure but I think my friend Joe might be someone you should talk to,’ you will have to decide the best way to make the initial approach. In an ideal world, of course, your client will call to let his or her friend know that you will be making contact, although this is often something that many advisors don’t feel comfortable asking clients to do.
A telephone call from you out of the blue is seldom the best way to initiate contact with a prospective client. The risk is that the client will be caught by surprise and as a result will feel pressured when you suggest a meeting.
Consider instead an introductory letter, stating that you are writing at the suggestion of this prospect’s friend, who is a long-standing client, enclosing some background information and indicating that you will be calling to follow up. This sends the right signal in terms of patience and professionalism, and also sets the right tone for that initial phone call.
7. Nurture the prospect
In times past, advisors took the view that if someone they met with didn’t turn into a client in the short term, they should be written off. More and more, serious prospects are taking time before deciding to begin working with a new advisor. They may take weeks, months, even years.
Should the initial meeting not be fruitful and even if prospects don’t want to meet with you at all, you still need to consider how to stay in contact to nurture your relationship with them. Keeping them on the mailing list for seminars, newsletters and client appreciation events, with periodic low-key follow-up calls, should be a core part of your referral maximization process.
8. Follow up with new clients
One successful advisor who we recently talked to has a focused plan in place to ensure that new clients feel extremely well cared for in the critical early stages of a relationship. He then makes a regular habit of sending these new clients a report card after three months to assess their satisfaction with how the transition has been managed, and phones them to follow up and get their feedback – which, of course, is almost always positive.
When new clients have been referred, this advisor concludes the telephone call by asking their permission to share the report card with the original client who made the connection.
By doing this, the financial advisor not only reminds the original client of the value that he places on referrals, but he also validates and reinforces the client’s decision to make that initial introduction and reduces the sense of risk the client may feel in making future introductions to friends and relatives.
9. Track referrals
Referrals are the most important form of indirect income that you can receive from a client. It is critical that you consistently monitor and track the quantity and quality of the referrals you receive from your existing clients in your contact management system, and then incorporate them into the priority you give to your individual clients.
10. Thank clients for referrals
When you receive a referral from a client, the one thing you can do that more than anything else is likely to lead to more referrals from that same client is to express your appreciation in a clear and concrete fashion. A thank-you note is a given. The question is what else you should do.
Some advisors will send a small token of thanks – a box of chocolates or a tin of popcorn – to the client’s office the next day. Other advisors will make an investment at Christmas by sending a bottle of wine or a Christmas centrepiece to all clients who have provided them with referrals over the past year, with a note expressing their thanks for the opportunity of working with that client over the year and for the confidence that client has shown in introducing them to their friends or family members.
But no matter how you thank your clients who have provided you with referrals, what is critical is that they do feel well and truly thanked.
Putting a plan in place to maximize referrals takes time and incorporating it takes discipline. Make that plan happen, however, and you will find that the quantity and quality of referrals and new clients will increase substantially as a result.
Dan Richards is president and Kim Buitenhuis is executive vice president of Toronto-based Marketing Solutions. To learn more about the services the company offers to financial advisors, visit www.mktgsolutions.com.