To ask or not to ask… for a referral


Most advisors have heard practice management coaches and experts tell them that referrals are the most powerful, cost-effective source of new business. Indeed, advisors I’ve worked with say that over 50% of their annual business growth can be attributed to their referral process. Many of these advisors also report that their referral strategy has actually enhanced, rather than detracted from, their relationships with existing clients.

Although most clients who are happy with the service their advisor is delivering are willing to recommend the advisor to their friends and families, few are ever asked. It raises the question: why do many advisors struggle with embracing a consistent process for generating referrals?

In conversations I’ve had with advisors, it appears that many worry that clients will feel put upon and burdened by the request to be introduced to friends and family. In my observation, that’s often because the advisor:

o   Views the client relationship as being more fragile than it really is

o   Hasn’t articulated to the client exactly who they want to be introduced to – who their target market is

o   Approaches the referral request in an advisor-centric, “How can you help me?” way

o   Hasn’t embraced the mindset that they deserve the referrals because their expertise could truly help some of the people their clients know and care about

In my experience, advisors who successfully use referrals to drive new business always know how, when and where they will ask for referrals. These advisors do their homework and turn referral opportunities into introduction opportunities. Specifically, they:

  • identify which prospects they want to meet. For instance, they never attend a cocktail party, charity event or dance at the country club without first reviewing the guest list and identifying 2-3 people they want to make a point to meet
  • determine which client can help introduce them to those prospects
  • make sure that the client that they will be asking for the referral from is someone that truly values their services
  • determine when and where it might make sense for the introduction to occur. For instance, perhaps there’s a charity event coming up that the prospect and your client will be attending, or you can suggest a round of golf with the client and two friends including the targeted prospect.
  • are deliberate and educate their client on why their services are well suited for the prospect.  e.g., both your client and the prospect are small business owners and you remind your client that you have built your practice around helping small business owners manage the overlap between their business and personal finances.

If you are serious about growing and taking your business to the next level then you need to embrace a consistent referral process and keep in mind these four hallmarks of a successful referral strategy as you build your own process:

  1. Embrace a client-centric approach. Referrals are not about you building your business – they are about clients wanting to help friends and family. You are offering to your clients help to enhance the lives of people they know and care about. Consider a conversation that goes like this:

Today people have to rely more on their own savings to help support them in retirement because pension funds have gone by the wayside. Getting help to better manage their 401(k) plans and savings is more important than ever. One of the benefits I offer my clients is a free consultation for any of their friends or family that might need some help in determining if their investment portfolio and 401(k) are set up to meet their needs in retirement. Is there anyone you can think of that might appreciate some help and advice?

  1. Be pro-active. Many advisors wait for clients to reach out to them with referrals. You have the ball, run with it.  You have to ask clients for referrals because unless you do, they will never know that you are willing to help their friends and family.
  2. Set specific weekly goals for how many referrals you will ask for and be very clear about what type of client you are looking for. Set goals that are specific to the actions you will take as opposed to the leads you will get.  For instance, commit to identifying 3 new prospects a week and the client, friend or center of influence who can potentially introduce you. In addition, set a goal of 1 new introduction every 2 weeks. These action goals are much more effective in generating results than just committing yourself to 5 results/leads per week/month.
  3. Embrace a referral mindset. Feel good about the process of asking for referrals and expect to get them.

The bottom line

Don’t let your fears get in the way of incorporating a solid referral marketing strategy into your business plans. The payoff is every advisor’s dream: a cost-effective engine for driving continued growth in your business where you have control of the wheel.

Michele Dillon is a practice management consultant for Russell Investments’ private client services business.

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