CEO, INC ADVISORS | International Keynote Speaker | Author of The Growth Mindset | Adjunct Professor
Organic growth is the lifeblood of any business. However, for the vast majority of the 300,000 advisors in the U.S. alone, focusing on business development in any form of activity doesn’t happen with any level of consistency. The advisors that are serious about growing their business understand that fee compression will force them to control more assets in the future.
I will lay out the best practices regarding referrals based on 35 years of experience working with thousands of financial professionals on four continents. As ancient Greek philosopher Plato once said, “Human behavior flows from three main sources: desire, emotion, and knowledge.” The following information is only useful if the desire is present.
Let me be clear right up front: asking for referrals from clients before exceeding their expectations is like trying to build your house without a strong foundation. Without a strong value proposition or success executing on your promise with current clients, a referral strategy will yield little fruit. Here are some useful things to know about referrals:
Are you ready to develop and grow your business through referrals? If so, read on for my 10-step process for increasing referrals:
Step 1: Your Mindset — Knowing who you are is the first step to making meaningful change in your business. The biggest hurdle for most people is their attitude toward ‘asking’. What’s between our ears is our beliefs — meaning that the mindset we bring to the world or the way we approach life is based on beliefs that we developed at a very early age. These beliefs can propel us forward toward our goals or stop us from reaching our potential. You may have a belief that asking for referrals will make you come across as unprofessional, desperate, awkward, or too much like a salesperson. If you feel this way, you’re right: you will be perceived this way until you change your worldview and perspective. You see, until you address your mindset toward asking for referrals, nothing sustainable will likely happen. Why? Because you will not be committed to the process about what you are ‘offering’ because deep inside yourself you believe you are helping your clients. If you feel great about the solutions you are offering, you probably want to help others as well. Therefore, you’re not ‘asking’ for referrals — you’re ‘offering’ your clients the opportunity to tell a friend, colleague, or family member about what you are offering. Additionally, you’re giving your best clients the opportunity to help a friend by introducing you. It’s all a matter of your perception.
Step 2: Get Your House in Order — As you know, when clients receive superior service and a consistently positive client experience, they are more likely to introduce you. Before developing a referral plan, be confident that your clients are very satisfied. How do you know if your clients are happy? The most obvious way is when they transfer more assets to you. Keep in mind, you will never have happy clients if you have unhappy associates as part of your team. Therefore, a great client experience starts with a great employee experience. I’m still baffled by the fact that most organizations don’t understand this simple concept. If you would like to read more about creating a great organizational culture, read my latest article in Investments & Wealth Monitor titled “The Best Leaders Get the Culture Right.” You can read it on my website or LinkedIn.
As the wealth management business continues to become more commoditized, service is one of the best ways to distinguish yourself from the competition. In our business, we can’t operate with the old adage that no news is good news. Asking clients for feedback on a regular basis is a must; in fact, it’s the only way to make improvements and identify those clients that are dissatisfied. It’s all a part of getting your house in order so you feel confident about engaging with a referral strategy.
Step 3: Who to Ask/Offer — Who you should ask for a referral is a judgment call. You’re in the best position to know who, when, and where. Of course, identifying your most satisfied clients and your best relationships will likely be a good starting point. Start by segmenting your clients into three categories: silver, gold, and platinum. Silver clients are those who are either somewhat satisfied or somewhat dissatisfied. These clients typically do not have most of their assets with you. Gold clients are satisfied clients who may or may not make an introduction while platinum clients are the most satisfied and the most likely to make an introduction. Within this category, there is a subgroup of clients who I consider advocates. What’s an advocate? These are the clients that trust you 100% and believe strongly enough in you that they will go out of their way to refer business to you. These clients genuinely like you and you genuinely enjoy spending time with them. They can give you access to a network of people with significant assets to invest. Having five to 10 clients as advocates can take your business to new heights.
A great way to develop advocate relationships is to get candid feedback about your business on a regular basis. Create a client advisory board made up of 10 to 15 clients who meet over dinner twice a year. Their job is to provide open feedback on ways to improve your services and grow your business. These clients will be in the best position to make introductions, because they will develop deeper relationships with you, they will understand your business model, and they will likely have an emotional attachment to the success of your business.
Step 4: How to Ask/Offer: The Art of Asking the Right Questions — First and foremost, your communication skills, social skills, emotional intelligence, and other soft skills will separate you from the crowd. The words we use, our body language, our tone and rhythm of speaking, as well as timing are all part of a total mosaic of delivering the “art of the ask.” Being a great communicator starts with being an outstanding listener, which means listening intuitively, identifying what is not being said, picking up on the subtle clues of how a person is receiving what is being said, and quickly developing the appropriate response. How exactly you do this is a matter of style. I don’t believe in a cookie-cutter approach; your personal style is an art because it is based on your creativity and what you feel comfortable with. The most important aspect is to be authentic. Your request needs to feel natural to you as well as to your client. Here are some potential ways to ask for the referral or introduction (introduction is actually a better word because ideally you want your client to introduce you via the phone or email):
Bob, you told me how much you enjoy working with our team, and I want to thank you for placing your trust in us. It means the world to me. It’s such a pleasure working with you. Bob, I would like to continue to grow our business with more people like you. Can I help you think of some friends or coworkers who may want a second opinion about their portfolio?
Bob, you’re a member of the Bay Head Yacht Club. I’m sure you know one person that would appreciate our help?
Anna, do you know anyone else who would want to learn about this change in the tax law?
Bob, who do you know that someone that works with an advisor and is unhappy with that relationship?
Lisa, who in your organization will be retiring in the next 12 months?
Mark, I’m working on my business plan for 2019 and since we have known each other for a long time, I would love to hear your input. Can I buy you lunch sometime in the next few weeks to discuss this and also to catch up?
These suggestions are not meant for you to memorize. They are just ideas and they may be my style but not necessarily yours. The key is to practice several different ways of asking until you find the right way for you. Plus, more practice creates that memory muscle when it comes to asking for introductions and it will inevitably become second nature over time. Be you, be real, be direct, keep it simple, slow down when you’re talking, and leave the hidden agendas behind.
Step 5: When to Ask/Offer: Timing is key — Ask when you feel relaxed and it seems natural to bring it up. Keep in mind that nothing hurts the relationship more than sounding desperate and not being completely transparent. Avoid coming across like your life depends on you receiving an introduction. Successful people prefer to do business with other successful people. As such, confidence is key.
For the client, a good time for you to ask is when they feel very satisfied with you and your team. I don’t believe in asking too early on in the relationship because you haven’t given the relationship enough time to develop. However, you can set the stage in the first discovery meeting. For example, you might say something like: Mark and Lisa, it’s been a pleasure meeting you today. We feel confident based on what you shared with us that we can meet your expectations. Our goal, however, is to exceed your expectations because our business model is built on introductions. We always welcome an introduction if our services exceed your expectations.
Based on your experience and wisdom you have to make a judgment call on the timing. I’m not a fan of the broad and generic request asking all of your clients for an introduction. That’s not personal enough for me. Sending out a nice personal letter requesting an introduction may work for some clients, but for your best clients and CIOs I always recommend face-to-face interactions over lunch or coffee. During your quarterly reviews is also a good time. After the meeting is finished, you might say: Mark and Lisa, thank you for coming in today. I feel confident that we are on track to meet your long-term goals, plus I learned more about what’s important to you going forward. As you can see, we take a very holistic approach to serving your needs, so if you can think of your friends or family members who would appreciate the same approach, please feel free to introduce us.
My favorite time to ask/offer is situational — when a conversation naturally segues into asking for the introduction. It might be something the client says that makes it very natural to ask. You’ll notice these opportunities if you’re paying attention, opened minded, and confident enough to ask. It could happen on the golf course, in the car, in the hallway, over the phone, or at the US Open tennis tournament. Anywhere.
Step 6: Reciprocity — The idea of reciprocity has been around since the beginning of time. Reciprocity means to exchange things with others for mutual benefit. People not only do business with people they like but also with people who give them what they want, whether it’s tangible or intangible. If you want to stand out, you must deliver the unexpected. The ultimate goal is for your clients to say you’re irreplaceable. Let’s imagine that each client keeps an emotional bank account with a balance that reflects how they feel about you and your team. This emotional bank account has deposits and withdrawals. Every positive experience, big or small, is a deposit and every negative experience is a withdrawal. Being late for a meeting, not following up on a timely service-related issue, and not meeting the client’s goals are all withdrawals. The secret to emotional banking is getting all the small things right. And getting the small things right creates a lot of deposits. It means paying attention to the details of your service model and having highly engaged people on the team that have the same core values as you when it comes to creating an outstanding client experience. The best advisor makes it a habit to under promise and over deliver because they want to keep making deposits.
For the past three decades, I have been practicing the philosophy that if I give you what you want, you’ll give me what I want. Therefore, reciprocity starts with listening to what’s truly important to your clients beyond their portfolios or financial plans. For instance, if your client is an accountant or attorney, they will likely want you to refer people to them just like they refer people to you. Some clients may want you to support their favorite charity or simply be a trusted coach that they can rely on. Small personal gifts go a long way, a book for example. I’m always looking for opportunities to create an IOU.
Step 7: Confidence — The more decisions you make, the more mistakes you’ll make. The more things you try, the more failures you will have. And, that’s just fine. As I said in step 1, everything starts and ends between your ears and that’s also true for confidence. Let’s change our worldview about failures and rejections. I’ve learned over the past 35 years that successful people fail all the time. They fail more because they take more risks. No CEO or successful entrepreneur achieved success without setbacks. Unsuccessful or moderately successful people don’t usually fail because they rarely step outside of their comfort zone, due to the fear of failure. The wealth management business doesn’t reward talkers; it rewards doers. It doesn’t reward victims; it rewards people that take full responsibility. There is no question that once you engage in any business development activity you will have a percentage of rejections or failures. However, these are simply learning experiences and opportunities to improve. Approach your referral strategy like it’s a game that the only way to lose is not to play the game. This is not a spectator sport. The fun is being an active participant, and like any game, the fun is when you’re challenged. Therefore, continually test yourself to try new things when it comes to your business development strategy. Those meaningful victories will give you more confidence.
Step 8: Motivation and Recognition — Maslow, an American psychologist, spent 40 years trying to figure out what motivates people. Maslow’s pyramid of the hierarchy of needs demonstrates very clearly that recognition is a strong motivator for people. In fact, studies show that some people would prefer to be genuinely recognized over a small increase in compensation. So, when a client does make an introduction, what are you doing to say thank you? First, make a phone call to thank them. It’s also a good time to remind the client that you honor privacy and never discuss clients’ matters with anyone. Second, send a small gift with a handwritten note that says something like: Greg, it’s such a pleasure to work with you and your family. I can’t thank you enough for the trust and confidence you’ve placed in my team and for the introduction to Mary and Steve. I’m truly honored, and it means the world to me. It’s a privilege to have the opportunity to be your advisor and I look forward to a long relationship with you. In other cases, you might take your client out to lunch or dinner, with only one agenda: to say thank you and show your appreciation. If you make a big deal over the fact that you truly appreciate these introductions, they are likely to give more.
Step 9: Reward Yourself and Your Team — Avoiding complacency starts with never losing curiosity and setting new goals to keep moving forward. Some of my mentors are in their 80s and they are still seeking out new goals — whether it’s climbing mountains or crossing the Atlantic Ocean for the twentieth time on a 42-foot sail boat. A leader’s greatest motivation is a new challenge and their greatest liability is insecurity.
When you develop your referral strategy, create some milestones every week and month and reward yourself and your team for meeting those milestones. You may want to send handwritten notes to the people on the team who are engaged and doing a great job. Family is important to me so I always looked for opportunities to include family members at office celebrations or dinner gatherings. Look for opportunities to celebrate every month because people want to be part of a winning team. And don’t be an island. Remember that mountaineer Sir Edmund Hillary needed the help of Sherpa Tenzing Norgay to reach the summit of Mount Everest.
Step 10: Maintain the Right Energy and Resilience to Stay the Course — Having the right energy starts with taking care of yourself, both mentally and physically. Over my career the biggest challenge I faced (and also what I observed among many advisors) was tolerating the wrong people in our lives — or toxic people. A toxic person could be anyone in the office, home, school, or even client. Toxic people in our lives can be a distraction at best and derail us from our mission at worst. Without good energy, you will not be able to bring your A game to engage with a referral strategy. Try and surround yourself with positive people. It’s taken me a long time to realize how important it is to surround myself with people that are real, authentic, and positive. I have zero tolerance for bullies or people who are passive aggressive or negative. The following are some characteristics or behaviors of toxic people:
It’s difficult to get to the right place by being around the wrong people. And more importantly, you can’t change people around you, but you can change how close you are to them.
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