Why Asking for Referrals Is Not a Best Practice

Across the board, advisors with $100 million or more ask for referrals less than other advisors.

One of the questions in my "Best Practices 2011" survey was: "In your client contact, how often do you ask for referrals?”

Naturally, you would suspect that people who ask the most are doing the best. And you would suspect wrong.

I separated my survey respondents into two groups. There are those with more than $100 million AUM and with less than $50 million AUM.

Across the board, advisors with $100 million or more ask for referrals less. Here are the numbers.

How Often Do You Ask for   Referrals? (Percent)

$100 million in AUM and Up

$50 million in AUM and less

Every Client Contact

 1.6%

 7.4%

50% of Client Contacts

53.1%

57.4%

Never 

45.3%

35.3%

Source: Research magazine    
July 2011, Best Practices Survey     

 

How Often Do You Ask for   Referrals? (Response Count)

$100 million in AUM and Up

$50 million in AUM and less

Every Client Contact

  1

10

50% of Client Contacts

34

78

Never  

29

48

Source: Research magazine    
July 2011, Best Practices Survey
   

 

Should You Ask for Referrals?

Most, if not all (present company excepted) “advisor advisors” regale you with the necessity to ask for referrals.

I would submit that asking for referrals is most certainly NOT a best practice and, in fact, qualifies as “worst practice.”

And the evidence mounts.  In a survey conducted by Julie Littlechild,”The Economics of Loyalty,” she found that only 2% of clients gave a referral when asked.  I thoroughly covered Julie’s path breaking survey in my February Research Magazine article. You can read it here.

How to Increase Referral Business

If you can’t increase referral business by asking, what can you do?  Lay on the ground with your mouth open and wait for the fruit to drop?

Just as asking is not the answer, waiting is not either.

While asking for referrals is highly ineffective, you can “promote referrals.”

Worst practice:  Who do you know in your Rotary club I could call?

Best practice:  Next time you go to Rotary, if you run into someone new to your club who might need a local financial advisor, would you mention my name?

If you have been following my work at all, you know I have long been against asking for referrals.  I am not going to re-state all that information here. 

A 'Worst Practice'

Sometimes it’s tough not to be a macho or macha sales professional and ask directly for what you want.  But the facts are: it just doesn’t work.  Even if it makes you feel wimpy, DON’T DO IT. 

A “real referral” (the ones who become clients) are “names volunteered by a client as someone needing advice."  If you ask for a referral, by definition you won’t get one.  If you get anything at all, you will get a name.

Asking the client for referrals puts the client on the spot and makes him or her uncomfortable.

Very few of these names ever become clients.

At the end of it all, you feel less professional.

So please, no worst practices.

Need Proof?

A while ago, I crafted “The Referral Challenge.”  My challenge tells you how to call ten clients and promote referrals.  I would be shocked if one or two of the 10 don’t VOLUNTEER a referral. And you won’t even have to ask.

Learn more about the referral challenge here.

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This blog post, as well as many others, is based on my survey “Best Practices 2011.”  I have promised survey participants a free copy of my enhanced ebook, “Making Referrals Happen.” By filling out the survey, you can compare your answers to “best practices.”  The survey is still open.  You can take the survey here.  Past articles in my best practices series are archived here.

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Bill Good is chairman of Bill Good Marketing and writes a regular blog for AdvisorOne. He is also the author of "Prospecting Your Way to Sales Success" and Hot Prospects. His “Sales Seminar” column appears monthly in Research Magazine.

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