(May 2006)

If you ask a room full of successful advisors whether it’s better to ask clients open-ended or closed-ended questions, chances are they’ll agree unanimously that open-ended questions are the way to go.

The core principle drilled into advisors from Day 1 of rookie training is that to engage clients and prospects in conversation, you need to focus on open-ended questions.

And that’s absolutely true — except when it comes to asking for referrals.

One reason open-ended questions work in most situations is that clients can’t respond with a simple one-sentence answer. An open-ended question, such as “Tell me about your time at school,” requires much more thought and a more detailed answer than the closed-ended question “Where did you go to school?”

When it comes to referrals, however, we want it to be easy for clients to respond. This is the Law of Specificity: the more specific the question, the easier it is to answer and the more likely we are to get a response.

Let me illustrate with some examples:

Last spring, I launched a six-month pilot program to test and evaluate a broad range of approaches to obtaining client referrals. Twenty-four successful advisors participated in the program. One of the participants in the pilot program had as his largest client one of three partners in a firm of architects.

This advisor had raised the subject of referrals with this particular client in the past but had used a traditional approach, something along the lines of “You are one of the clients with whom I most enjoy working. Whom do you know that is in similar circumstances to yourself that I can help in the same way I’ve helped you?”

The client responded with the universal kiss-off: “I can’t think of anyone right now. But if I do, I’ll let you know.”

In a meeting last spring, the advisor took a different tack: “Over the five years that we’ve worked together, you’ve often mentioned your partners, Pat and Joan. I wonder whether either of them is someone to whom I should be talking.”

The client responded, “I don’t know — I’ll ask them.” Another kiss-off, this advisor concluded.

Later that day, he got a call from the client: “I’ve talked to Pat and Joan. Pat is happy where he is, but Joan would like you to call her.”

Why was the outcome so different on this occasion?

Very simply, because the advisor had asked a straightforward, specific, closed-ended, yes/no question that the client found easy to answer.

Business owners

A second example reinforces this experience.

Another participant in the pilot program was an advisor who focused on business owners. Like the previous advisor, he had become discouraged asking for referrals because of the frequency with which he got the “can’t think of anyone right now” brush-off.

Last May, he met with a client and said: “I’d really like to have more business owners like you as clients. As you think about the other business owners who work out of your complex, are there one or two who come to mind that it would make sense for me to approach?”

A clear, specific, closed-end question — to which the client answered, “Not that I can think of right now.”

In September, the advisor met with this client again. Over the course of the meeting, the advisor said: “When we spoke last, I mentioned that I’m going to approach other owners of businesses in your complex. I have a list here of 15 businesses in this facility. I wonder if you could glance at this and see if there is someone you think it would make particular sense for me to contact.”

Faced with the list, the client identified one of the other business owners with whom he had coffee on a regular basis — and gave permission for the advisor to mention that they worked together when the advisor contacted the prospect.

The advisor was fairly specific in the first request — “To what other businesses in your complex should I be talking” — but, in this particular case, not specific enough. He had to be more specific still and present his client with a list of other business owners in order to get a response.

Presenting clients with a list of colleagues will not always be appropriate; that’s when you have to tailor your approach to the client.

@page_break@But the lesson is crystal clear: the more specific the approach, the less work the client has to do and the easier it is to get an answer.

For advisors who want to pursue this approach, there are two important things to bear in mind.

First, to do this right, you have to bring to bear a superior understanding of the client’s network of friends, family and acquaintances. It also requires that you invest some time before the meeting to plan your approach.

Second, even asking in an extremely specific fashion using a closed-end approach, you will still hear “no” more often than you’ll hear “yes.”

What’s important is that most clients approached in this fashion do not feel unduly pressured. So you don’t have to worry about paying a big price for that no.

And, just as important, you are more likely to get either a yes or a no.

It’s not the nos that kill us in response to requests for referrals; it’s the cases in which we get no answer at all. IE

Dan Richards is president of Strategic Imperatives Ltd., a Toronto-based consultancy that delivers training to financial advisors. He can be reached at richards@getkeepclients.com. For other columns in this series, go to www.investmentexecutive.com.