Stop looking for new silver bullets that will magically produce referrals from thin air—they don’t exist. However, if your clients trust you and know whom you serve, they may very well do the referring for you, provided you give them proper preparation.
Learned any referral secrets lately? The truth is, there are none!
We do however hope to capture your attention about a subject that already has as much or more written about it as almost any topic aimed at financial advisors.
You already know:
You must have these basics in place to get anywhere. Yet even if you do, and despite all the efforts made by FAs, referrals may still come slowly, if at all. And yet, we know we need referrals to grow our business.
One of our favorite researchers and writers is Julie Littlechild of Absolute Engagement, http://www.absoluteengagement.com/blog/. Julie has pointed out “the reason clients refer may have very little to do with helping the advisor and much more to do with helping a friend, family member, or colleague.” She has found that “clients are more likely to provide a referral to help a friend, rather than to help an advisor,” so “positioning for referrals in a way that clearly demonstrates how the advisor can help a client’s friend will be more effective.”
While we have been taught that asking can drive growth, Julie has found that in only a small percentage of cases did a client refer because his or her advisor asked for a name vs. a client giving a recommendation to a friend or family member because that person described a financial challenge or asked for a recommendation. Julie stated that “In that moment, and motivated by a desire to help, they (your client) offered up the name of an advisor... (hopefully yours.) They were motivated by the needs of others and they took action when that need was clearly articulated.”
So, the question is, “How do you prepare your client in advance for those moments when your clients are asked for a recommendation or a friend, family member, etc. describes a financial challenge?”
Preparing a client to refer you
In the case where a friend, relative, etc. asks your client for a recommendation, your client may in fact give your name. To increase the likelihood of a referral in this situation, your client needs to be prepared by knowing what you do and who you do it for.
Let your clients know on whom you focus, in advance, in a prepared but somewhat casual manner. For example:
“By the way Ed, you know my focus is on…
Tailor the who (families, single heads of household, airline pilots, etc.) and the what (ability to retire, secure their situation, etc.) based on the person you are speaking with and your niche if you have one (a good idea but a separate subject.) It’s best to limit your statement to one or two specialties so your client can retain what you said and recall it when a friend, family member, etc. raises the concern. Get away from trying to say you do everything for everybody otherwise you may wind up doing nothing for nobody.
Some thoughts about niches
Let’s continue with the referral theme “Clients are more likely to provide a referral to help a friend rather than to help an advisor” and “positioning for referrals in a way that clearly demonstrates how the advisor can help a client’s friend will be more effective.”
If you have a niche, it’s easier to get that across to clients if they are part of that niche. It should be comfortable to say to good clients, “By the way Ann, if any of your friends or colleagues at IBM are also contemplating retirement (or are part of this layoff or…) and aren’t sure if they have enough money to sustain their lifestyle in retirement (or are concerned about their financial security, or…) I would be glad to help them work through that question and answer it.”
While people “contemplating retirement” is not a niche per se, you get the idea. In a pure niche (contemplating retirement from IBM Austin), you can say, for example, “If any of your colleagues at IBM Austin is contemplating retirement, I’d love to chat with them.” Similarly, “If any of your fellow American Airline pilots is contemplating retirement, I’d love to chat with them.” Note that a pilot sub-niche may address tens of thousands of pilots. The Bureau of Labor Statistics reports a median pay for airline pilots of $114,200. It is also reported that the most experienced pilots of American Airline’s largest aircraft are paid an annual average of $213,800. (Income depends on seniority and routes flown. Regional airlines pay significantly lower than major carriers do.)
The question you need to ask is a function of your client and your niche. Note that niches can be an occupation or any of a number of other categories:
Planting a seed
Note that in few of these cases are you directly asking for a referral. You are “planting a seed” so your client knows what you do and who you do it for. When a friend, neighbor or colleague mentions a concern, your hope is that your name quickly comes to mind...your seed has sprouted.
You can also see that knowing a lot about your clients and their families (and relationships, e.g., LinkedIn) can be very important to your referral efforts. Some FAs capture a family tree of their clients both so they can understand and help their clients and their families as appropriate and also to understand where family referrals can come from. Necessarily, you would likely have already built a strong relationship with that client before building that family tree.
I also suggest not asking a question with a lot or “ors,” that is, “If any of your colleagues at ABC are contemplating retirement, or if you know anyone who is getting divorced, or if you know anyone selling their business, or... I’d love to chat with them.” Focus your client on a single thought at a time, i.e., plant one seed at a time so as not to be confusing about what you want. Down the road as you speak with your client, you can ask another question about other niches or opportunities if and as appropriate.
What you’re looking for
What we are looking for are “money in motion” opportunities. There are four primary “money in motion” categories:
There are a number of types of transitions in each area. For example, with work life transitions, there can be plans to retire, the sale of a company, a layoff, a change in jobs, etc. In doing a bit of research, you can identify which situations are most prevalent. For example, there are about:
As an aside, I do not suggest divorcees as a primary target niche unless you are a Certified Divorce Financial Analyst (CDFA) as there are many unique and complex issues associated with divorce such as, the short-term and long-term effects of dividing property, analyzing pensions and retirement plans, recognizing the tax consequences of different settlement proposals, etc. There are issues beyond those that most FAs deal with. However, once through the divorce, the “single, mature head of household” can be a good niche market.
Providing context is paramount
My suggestion therefore is to put your request in context of the transition on which you want to focus, e.g., “If any of your colleagues at ABC in XYZ location are contemplating retirement, I’d love to chat with them.” “If any of your friends have recently left their job, I’d love to chat with them.” Be prepared in any of these requests to relate a situation where you were able to help another person and how you did that.
“I recently worked with a client’s uncle who was laid off from his position. The gentleman had some savings but was concerned about his ability to support himself and his family if he didn’t get a job with equivalent income. What we did was a complete financial plan and identified his shortfalls and what he would need in terms of income from another position.”
“In this case the gentleman always wanted to change fields but that would have required taking a lower paying job in an area he had always wanted to explore. This was his opportunity so we estimated his income needs, what kinds of position he could afford to take, what had to be done about his budget, options for his older children’s college expenses, as well as looking at his portfolio, and we were able to put together a life plan that would work for him.”
There are many ways to approach getting into the referral business, but preparing your clients to refer you is one of the best. If you plant that seed about what you do and whom you do it for, you’ll come to mind when someone they know is in a situation where they need financial help. Your clients will do the referring for you, and they will feel good about helping someone who needs your expert advice.
There are many other ways and an entire approach to getting referrals from Centers of Influence.
If you want to improve your business by exploring ways to create new levels of client service, “signature experiences” if you will, make an appointment on my calendar to discuss if and how I can help you.
David I. Leo
David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients.
If you would like additional details or have any questions about his articles or an interest in coaching schedule a free 45 Minute Strategy Session @ https://calendly.com/davidileo or contact him @ David@CoachDavidLeo.com. Call 212-598-4229 (Office) or 917-379-1249 (Cell) and visit @ www.CoachDavidLeo.com