Experts agree that referrals are the best way to get new clients. But once a client has recommended a friend or colleague to you, how do you convert that recommendation into new business?

“At one time, converting a referral into a client was an automatic process,” says Dan Richards, president of Toronto-based Strategic Imperatives Ltd. “Today, people are more discerning and might shop around for an advisor. The referral just puts you in a position to compete for the business.”

So, you should have a clear process in place when dealing with a referral. Richards recommends a “three-meeting sequence.”

First, consult the client who made the referral to get some background information about the prospect. Find out whether the referral was spontaneous, for example, and ask about the client’s relationship with the prospect. Also, information about the prospect’s job, where he or she lives and past experience with other advisors is helpful. “You want to know as much as you can about the prospect before picking up the phone to contact him or her,” Richards says.

One source of anxiety among many prospects and referring clients is not knowing what will happen when the prospect meets with the advisor. When you call to set up the meeting, let the prospect know about your meeting process. Tell them what will happen in each meeting and how long you expect the meetings will take. Ask if there are any specific issues and concerns they want to address.

Some advisors send an information package before they contact the prospect, with information about themselves and their firm. If you send an information package, include a note saying something like: “Your friend Robert has suggested that I contact you. So, I am going to call you in the next few days. In the meantime, I thought you might find this information of value.”

This is a crucial stage in the relationship. “You are trying to build a sense of trust and you are positioning yourself as a professional right from the start,” Richards says.

Cathie Hurlburt, senior financial planner with Integrated Planning Group in Vancouver, sends out an information package that includes a detailed questionnaire after the referral contacts her office. “When the referral phones,” she says, “I let them know that there’s a fee for an analysis.”

She then asks the reason for the call. “If the person can articulate a specific problem, then I will assess whether or not I have the skills to address it,” she says. “If I can’t, I’ll refer them to someone else.”

Hurlburt asks the prospect to bring to the first meeting documents to support the answers to the questionnaire. Giving this “homework,” Hurlburt says, helps ensure the prospect will be “organized and ready to work” when he or she comes in.

Every referral meeting is a little different, says Rob Kelland, director and associate portfolio manager with Kelland Group at ScotiaMcLeod Inc. in London, Ont.

When a referred prospect calls Kelland’s office, his assistant or an associate will set up a meeting and ask the person to bring along their financial documents and life insurance policies. Kelland then blocks off two hours on his calendar for the meeting.

At the meeting, he tells the prospective client about the firm, his team, his philosophy and their service model.

Kelland then asks a series of open-ended questions to get to know the person. “I sit back and listen to who they are, what they are about and what their plans, goals and objectives are over the short, medium and long term,” he says. “Some people are ready to sign over their business right away, while others want to hear more about the firm.”

Kelland doesn’t make specific recommendations at this initial meeting. The objective at this stage is to gather data.

THANK-YOU LETTERS

Some potential clients may want Kelland to examine their statements from another firm, in which case he will hold on to the documents and arrange to contact the prospects in a week.

After the meeting, Kelland follows up with a thank-you letter to the prospect and another to the client who made the referral.

At Hurlburt’s first meeting with a prospect, she identifies the prospect’s “issues and problems” and determines her mandate. At the second meeting, she presents her findings. If, for example, the client is looking for a comprehensive financial plan, Hurlburt makes a draft presentation, which is subject to revision. She then makes her recommendations to the client at a third meeting.

@page_break@But there is no hard-and-fast rule, Hurlburt says: “With a new client, it could take as many as five meetings — depending on the scope of the engagement.”

Richards recommends the following three-meeting intake process in order to convert a referral to a new client:

> First Meeting. A preliminary, comfort-building process for both you and the prospect, it might last 45 minutes to an hour.

Let the client do the talking, but keep the talk about finances general; don’t rush into specifics. If you both agree, you could charge ahead with the second stage, but you may need statements, tax assessments and other documents to proceed.

> Second Meeting. You get into the details of the prospect’s financial circumstances. Have the client bring along all relevant financial documents such as investment account statements and tax assessments. This meeting will run longer, and can be held within a week or less of the first meeting.

> Third Meeting. Make specific recommendations. Summarize what you and the prospect discussed in the first two meetings, repeat the key background, ask if you have missed anything and then say, “Here’s what I recommend.”

“Once you’ve had the first meeting, the second and third meetings almost always take place,” Richards says. “The three-meeting process lets the prospect feel that he or she has a choice, that if things don’t work out, he or she is not committed — that the prospect has a way out.” IE