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The Art of the Referral

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Recently, after listening to me speak about the referral process, several advisors privately admitted that although they work by referral only, they could not recall the last time they had actually asked a client for a referral. What could be preventing these advisors and so many others from asking for referrals? Is it a fear of rejection, or the idea that “real professionals” don’t ask for referrals?

Take note: Highly satisfied clients are delighted to give referrals. In fact, when surveys ask affluent clients why they don’t give referrals, their No. 1 response is that they are never asked.

Industry research shows that most clients who aren’t asked for referrals have the impression that their advisor is not taking new clients. Not only do most advisors fail to ask clients for referrals, they somehow give the impression that they don’t want them.

Revealing ResearchRecent research confirms that client referrals are an effective way to gain new clients. In January and February of 2007, CEG Worldwide conducted a comprehensive study of 2,094 financial advisors — the largest study ever conducted across all advisory channels. The surveyed advisors were classified into four quadrants:o Quadrant 1: 150 or fewer clients and net incomes (before personal taxes) of $300,000 or lesso Quadrant 2 advisors: more than 150 clients and net incomes of $300,000 or lesso Quadrant 3: more than 150 clients and net incomes of more than $300,000o Quadrant 4, the most successful group: 150 or fewer clients and incomes greater than $300,000

Nearly half (45.0 percent) of the most successful group of advisors (Quadrant 4) asked for referrals — a rate some three to four times greater than advisors in other quadrants. Roughly four in five less successful advisors said that client referrals were very important to them, yet fewer than one in seven regularly asked clients for referrals.

The research also shows that regularly asking clients for referrals makes receiving them far more likely. The most successful (Quadrant 4) advisors received 10 times as many referrals from their top clients as the least successful advisors (Quadrant 1). This finding also suggests that the best advisors are much better at translating referral requests into new clients.

Establishing a Formal Referral ProgramStarting a formal, disciplined referral program this week will have a dramatic positive impact on your business. CEG Worldwide recommends the following 12-step referral process:

Step 1. Set the Stage. Explain to your clients that time you spend on marketing detracts from time spent focused on them, and that they may be able to help their friends and business associates by referring them to you.

Step 2. Ask for the Referral. Now pose the referral request. Simply state the type of person you’re looking for and ask if your client knows anyone who fits the bill: “Do you know any other successful aesthetic dentists in the area who might benefit from my services, as you do?” Ensure that you always ask for a referral by using a written agenda for every client meeting that includes “referrals” as the next to the last agenda item.

Step 3. Ask for Additional Referrals. Once you’ve received a name, ask for another. Just say this: “Great! Who else comes to mind?” Continue to ask until the client has no more names to offer. A reasonable expectation is three to five, but why be reasonable?

Step 4. Gather Contact Information. Once you have a list of names, ask for background and contact information, as well as the best way to approach each prospect.

Step 5. Ask for a Personal Introduction. Personal introductions are the most effective and natural way to meet prospects. They become even more important, and more expected, as you move further up-market.

Step 6. Commit to Follow-Up. Assure your clients that you will follow up on all referrals that they provide, whether or not the client makes a personal introduction on your behalf.

Step 7. Wrap Up the Meeting. Express your appreciation and remind your clients that by helping you save time on marketing, you are able to spend more time serving them.

Step 8. Thank Each Client. Express your thanks in a handwritten note (print if necessary). You should mail the note the same day that you receive the referral, ideally, and should wait no longer than one day.

Step 9. Call Each Prospect. Your goal for the initial contact with each referral prospect should be to arrange a time to get together (for example, for breakfast, lunch or even golf). You can expect one of three responses.

1. “No.” If the prospect already has a financial advisor, offer a free second opinion on his or her portfolio.

2. “Maybe.” If the prospect is hesitant about cost, explain that there is no cost for an initial consultative meeting, and that you only take on new clients when you are sure you can add substantial value.

3. “Yes.” Schedule a meeting. Explain that you’ll send a follow-up letter outlining the financial information and records that you will need to review.

Step 10. Send the Follow-Up Letter. Do this immediately after arranging the initial meeting. Confirm the date and time of the meeting as well as directions to your office or the meeting place and a list of items the prospect needs to bring to the meeting.

Step 11. Check in With the Client Who Provided the Referral. Inform your curious referral source about how things worked out (bearing in mind client confidentiality, of course). A quick note or an e-mail is better than a phone call for this purpose.

Step 12. Thank the Client Again for the Referral. Clients who make referrals are likely to refer again, so make sure you acknowledge how much you appreciate their assistance. You can thank your referral sources with small gifts, but make sure any such gifts are appropriate and within regulatory limits.

The three most common mistakes that advisors make in implementing this 12-step process are: (1) failing to ask; (2) failing to follow through; and (3) pursuing un-profitable prospects (typically because the advisor failed to describe in detail the exact kind of client he or she is seeking).

Don’t count on implementing this process on your own. Instead, designate someone in your office to head up the referral program. That person’s job is to keep your referral program on track by continually reminding you of the next step, providing you with the materials you need (such as stamped thank-you notes), scheduling the necessary appointments and so on.

Start this process as soon as possible. You’ll find that it becomes increasingly easy as the referral program gains momentum, and that asking for referrals will become second nature. Your clients will become so accustomed to your asking that some will actually walk in with a list of names and business cards. Let them help you make your business flourish. To start, all you have to do is ask.

Patricia J. Abram is a senior managing partner with CEG Worldwide in Florida; see


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