Rethinking how you ask for referrals

This is the seventh in a series of articles on the changes that advisors need to make in order to prosper in today’s increasingly competitive environment.

Every advisor recognizes the critical importance of referrals in bringing new clients on board. Our research indicates that referrals play a role in attracting 70% of new clients. Not every advisor, however, understands the extent to which there’s been a shift in what it takes to get those referrals.

Let’s start by thinking about the way referrals used to work. In the old world, you got referrals for doing a good job. Some advisors even saw referrals as something to which they were entitled, and became frustrated and annoyed if a client for whom they’d generated good returns wasn’t forthcoming with referrals.

Asking for referrals was an erratic, hit-and-miss process. Sometimes you asked, sometimes you didn’t. Sometimes you used one approach, sometimes you used another. Most approaches taught to advisors started with the premise that clients didn’t want to provide referrals and so they had to be extracted by mild manipulation or pressure.

Think for a moment about some of the most common “referral lines” used in the past:

“Would you rather I spend my time looking for new clients or working to serve you better?”

“You’ve told me you’re pleased with the job I’ve done for you. Who do you know who would benefit from the same kind of work?”

“I get paid in two ways, through the money you invest with me and also by introductions to people you know. If, 12 months from now, you’re satisfied with the job I’ve done for you, would you be comfortable introducing me to some of your friends?”

The measure of success when it came to referrals was quantity. If you got three names of neighbours or colleagues you could contact using the client’s name as a reference, you were happy. (Forget about the actual outcome of the calls or the way you and your client felt after the meeting. One reason many advisors didn’t ask for referrals was the discomfort they felt and the possibility of undermining the relationship.)

Like much of the referral process, recognizing or thanking the client for referrals and monitoring those clients who provided introductions was unstructured and hit-and-miss. Overall, the focus of the whole process of seeking referrals was very much driven from the advisor’s point of view. There was little in it for the client.

All this is in the past. Referrals will not become less important going forward, and they may well become more important. What will change is what you’ll need to get quality referrals.

Start by studying what it takes to merit an introduction to a client’s network of friends and family. In the new world in which we’ve all entered, the reward for a job well done is that you get to keep the client. More and more advisors are recognizing the need to put programs and activities in place to deliver a higher standard of client satisfaction than we ever needed to deliver in the past. One of the drivers to pruning client bases among some successful advisors is the desire to focus efforts on a small group of their most profitable clients and to take those clients’ satisfaction to a higher level.

A strong client relationship in which clients believe they’re getting outstanding value from their financial advisor is the foundation on which any successful referral program is built. Once you’ve established that foundation, you have to turn all of the traditional assumptions of referral activity on their heads. You need a well-defined, consistent process to communicate your desire for referrals that focuses on quality over quantity and gets the message across in a way that strengthens your relationship with clients rather than undermining it.

That means that the tired, old, pressure-based approaches are out. It means you never put a client under the gun by asking for a name right then and there. It means you stay away from referral contests and from expressing your desire for referrals in any way that is the slightest bit tacky or unprofessional — such as the suggestion from one U.S. consultant that advisors put on their business cards: “Don’t keep me a secret.”

What you do need to do is get your message out in a low-key, consistent, professional manner. An example comes from one advisor whose dentist, at the end of an appointment, told him: “Given how busy I am, I’m not taking any new patients except by referral. Should you know someone who might need my help, have them give my office a call and I’d be happy to see them.”

Once you do get a referral, you need to ensure that you have a clear, consistent process in place to track the outcome, so that you can let your client know what happened, and that your client feels acknowledged and thanked for having given you the introduction. Once you get one referral from a client, the best way to get the next referral and the referral after that is to make the client feel recognized and appreciated for the effort made on your behalf. A card of thanks with a plant, chocolates or a bottle of wine will often pay big dividends.

The whole process of communicating around referrals has to be driven from your clients’ point of view. They have to feel that they are genuinely doing their friends a favour by introducing you to them and be confident that their friends will thank them for the referral. Many advisors are using value-added activities such as newsletters, seminars and appreciation events as a comfortable way for clients to introduce them to their friends.

Finally, having done all this, you have to accept that no matter how good a job you do, some clients will never provide you with referrals — it’s just not in their makeup.

You need to value those clients for the business they provide you with themselves, and to place all the more weight on recognizing and acknowledging those clients who do feel comfortable giving you referrals.