Fred Bowie’s thriving life insurance practice abides by one simple rule: he only speaks to those who are interested in speaking to him. As the CEO of Ottawa-based Canada Retirement Information Centre Inc., Bowie decided early in his career that cold-calling wasn’t his style. Instead, he focused on ramping up his marketing campaign with a program of client events and seminars, radio advertisements, direct-mail pieces and a sleek, new corporate brand. His aim?
To create the kind of practice to which people would be drawn.

Not only did the strategy bring in new business, but it had an unexpected upshot.
Satisfied clients began telling their friends and co-workers about Bowie’s services and, one by one, a whole new set of clients trickled in. Today, he estimates that 30% of his 1,400 clients came from referrals.

What started out incidentally has since become the hallmark of Bowie’s 25-year career. This summer he launched a second mail campaign to generate referrals, and he considers his own client base his best resource for growth. “With referrals, you end up with a better-quality prospect,” says Bowie.

Most advisors agree that referrals are the most effective way of attracting new clients.
In essence, a referral is a shortcut to the ideal client. Existing clients already know and are quick to recognize friends and co-workers who, like themselves, can benefit from an advisor’s services. And unlike cold-calling or similar broad-based marketing strategies, the act of being referred eliminates the time-consuming and sometimes fruitless effort of turning a virtual stranger into a trusting client.

What’s more, consumers are depending more than ever on referrals when choosing financial services. A study conducted by Toronto-based consulting firm Strategic Imperatives Ltd. found that 70% of prospects with “meaningful” assets — $50,000 or more — rely on a referral when selecting a financial advisor.

But building a business through referrals remains more an art than a science — that is, there is no definitive process that guarantees success. According to research published in Advocis’s 2005 Best Practices Manual, less than 20% of advisors who implement a referral strategy are consistently successful. Even industry experts have conflicting ideas about the most effective way to approach a client for a referral, whether it be a lunch meeting (the “classic”), a letter or a simple face-to-face conversation, among countless others.

But for all the debate surrounding the perfect technique, the biggest mistake advisors make isn’t choosing the wrong approach but failing to devise a referral-generating plan.

“There’s this view among some financial advisors that they shouldn’t have to ask for new business; and if they do a good job, the referrals will follow,” says Dan Richards, president of Strategic Imperatives. “In an ideal world, that would be true. But in the real world, it doesn’t work that way.”

That observation prompted Richards to launch “STAART,” a six-month training program for advisors looking to build their practices through referrals. The course — whose name is an acronym for satisfaction, tracking, asking, accepting, reminding and thanking — trains advisors to treat referrals as an ongoing process that begins with building a satisfied client base.

“Fundamentally, a referral is a transfer of trust,” Richards says. “When you ask a client what they look for in a financial advisor, they’re not seeking performance or a track record or even expertise,” he says. “They’re looking to work with someone they can trust.”

So how do advisors build trust with clients?
Start with the basics, says Steve Klein, president and creative director of Ottawa-based Marketing Breakthroughs Inc., which specializes in helping professionals build and market their businesses. When advisors ask him for guidance on building their practice through referrals, his primary advice is always the same:

“Mind your clients, first and foremost, and keep minding them,” he says.

Only clients who are happy with the service they are getting will pass on an advisor’s name to a friend, relative or colleague. And one major misstep advisors make is asking for a referral before they’ve established a positive track record with clients.

Even worse, advisors often fail to communicate that they welcome new business.

Familiar clients need to be prodded, Klein adds. “The dilemma people have in this industry is that we live in a five-second world,” he says. “A lot of advisors are trying to sell to people with net worths greater than $500,000 who are often busy with their careers, their families, their own businesses — they’re time-compressed. So unless you jog someone’s memory and remind them that you’re open for business, it’s likely they won’t remember to talk to people about you. People forget very quickly.”

@page_break@Klein teaches a number of strategies for obtaining referrals, but emphasizes that the winning technique depends on both the advisor’s comfort level and clients’ receptiveness. The latter is what Richards calls “referral DNA,” a term that determines a client’s likelihood of generating a referral, using factors such as a client’s behaviour (is he or she a risk-taker? out-going?) and satisfaction level (high? low?). Although both factors provide useful clues into a client’s mindset, ultimately the best gauge of clients’ referral DNA is how they have responded to referral conversations in the past, Richards says.

Understanding a client’s level of satisfaction before any type of referral conversation is critical, not only because dissatisfied clients are unlikely to provide a referral but, more important, asking them for one too soon can further jeopardize the relationship with that client.

“Whenever you have a conversation with a client and he or she feels uncomfortable and pressured, you’ve harmed the relationship,” Richards says. “You’ve undermined your position.”

An effective way to avoid a potentially damaging situation is to ask clients to fill out a questionnaire to determine their satisfaction level, Richards says. In some instances, even highly satisfied clients are unwilling to provide a referral simply because it’s not within their comfort zone.
Instead of trying to transform referral-shy clients, advisors should focus on managing client expectations and creating what Richards calls a “foundation of client enthusiasm.”

“It’s about going above and beyond, doing the things that clients don’t necessarily expect that shows that you really care about the client’s long-term interests,” he says.
“You’re building a foundation with the client, which may lead to referrals down the road.”

How to ask

When it comes to approaching clients for a referral, there are two camps of advisors:
those who carefully select and follow a regimented process, and those who just ask. Bowie falls into the latter category.

“If you’ve done a good job and you feel confident about it, there’s nothing wrong with coming out and asking for help to build your business,” Bowie says. “If you ask for someone’s help, 99.9% of the time people are going to say, ‘What can I do for you?’

“And I think the clients feel good, too, [because] they’re helping you and they’re helping the people they referred to you,” he adds.

Although it’s hard to argue with success, some industry experts, including Rick Johnson, director of practice advisory services at Toronto-based Advocis, recommend more defined techniques.
“There are a lot of processes that work very well for an advisor because of a particular character trait or an advanced skill level,” he says. “It depends on the advisor.”

The outcome of any referral strategy largely depends on how specific the advisor is in his or her request. “Advisors often make the mistake of asking for a referral when they don’t know what they’re looking for,” Johnson says. “If I ask a client for the name of someone I can approach without defining that person, the client won’t be able to think of anyone. But if I ask for an introduction to somebody who is between the ages of 50 and 60, who has a net worth of $500,000 and runs their own business, the client will probably be able to think of someone,” he says.

Regardless of what approach advisors choose, they should always plan the initial referral conversation in advance. Act with confidence and purpose, and treat it the same way you would any other business transaction, Johnson says: “Asking for a referral is a presentation, and it should be no less professional than a sales presentation.”

The Referral Lunch

One of the most tried and true methods of requesting a referral is taking the client out for a “referral lunch,” which should be framed as an opportunity to thank the client for his business, says Klein, who teaches the technique to his clients. Advisors should choose a restaurant that is suitable for the client and use the time to reinforce the positive relationship.

“If all of a sudden you put your hand out and ask for a referral during the first drink, you’re sending the wrong signal,” he says. Wait until the end of the lunch to give the client an update on the business and then ease into the referral conversation.

“You say to the client, ‘We’re planning a further expansion of our practice and we’re looking to connect with several clients like you. If you know of anybody who can benefit from our services, as you have, we’d appreciate it,’” Klein explains.

The goal is to get the client thinking of one or two prospects that fit a specific client profile, which should be outlined on-site. Klein recommends following up with a friendly e-mail within 48 hours to thank the client for the lunch — and express enthusiasm for meeting the prospect.

The prestige introduction

Johnson recommends a method called the “prestige introduction,” in which the advisor asks a satisfied client to compose a short note introducing the advisor to a prospect.
The note is attached to a greeting card that includes the advisor’s name, company, address, phone number and two or three examples of service offerings.

The greeting card acts as a “pre-approach,” which signals to the prospect that the advisor will be making contact in the near future. Since the card comes with an introduction from the prospect’s friend or colleague, it has the advantage of inciting a feeling of familiarity, according to Johnson.

“What this card does is leverage off the existing trust with a client,” he says. “It comes from one person to another, connecting the advisor to both of them.”

But this strategy may not be a good fit with all clients. As Richards points out, clients dislike feeling as if they are doing the legwork for the advisor. This technique should be used only with clients who have demonstrated that they would be comfortable with it.

The Letter

Advisors who choose to write a letter asking for a referral should keep it short and concise, says Klein. The letter should begin with the advisor thanking the client for their business, followed by a few sentences about expanding the business and the need to reach new clients. In the last paragraph, the advisor asks for the referral and provides a clear outline of what type of clients he or she is looking for.

Never ask for referral in a postscript or at the end of a letter that focuses on other business details, such as investment performance, Klein says. “It’s not friendly, it’s not focused, and it’s not concise,” he says.
“With a letter, you’re focusing on the importance of the request. People won’t notice it if you tack it on at the end of an unrelated note.”

Referral postcard

A variation of the letter is the referral “postcard.” Like a letter, the postcard thanks the client for his or her business and outlines the type of services the advisor offers. A tearaway card at the bottom of the postcard allows the client to give the name and contact information of an appropriate prospect and mail it back to the advisor’s
office.

The postcard is an ideal way to reach a targeted audience, Klein says. “The approach is very specific. It may say, ‘I’m looking for clients over 55 with a net worth of $500,000 who want to save $100,000 in taxes’,” he says. “It has to be crafted in a way that sells the benefits of the referral.”

The Unlikely Referral

Some of the best referrals can come from unlikely sources. That may have been what Bowie was thinking the day he agreed to help a valued client’s 93-year-old friend file her income tax return. The woman wasn’t likely to become a client herself, but he filed the return and politely declined payment when she offered to write him a cheque. A few weeks later, she referred her grandson to Bowie’s practice.

It’s a prime example of what happens when you focus on keeping existing clients happy, he says.

“Sometimes referrals just come to you, and you have to be ready for that,” Bowie says.
“What would I have rather done with this 93-year-old woman? Charge $100 for filing her tax return — or get a referral to a $50,000 account?” IE