Virtually every advisor has been taught that generating referrals from clients and prospects is the way to success, but less than 15 percent of all advisors generate enough referrals to significantly impact their business.
Most of the time, the problems advisors have generating referrals is due to the training – or lack thereof – they have received, rather than with their performance. The traditional referral selling training has been to “do a good job and ask for referrals.” Yet it has been obvious for decades that this strategy really does not work very well.
Using the traditional approach, the typical advisor will get an occasional name and phone number or two from his clients, but seldom do these names and numbers result in a sale. Certainly, on occasion, these referrals become clients, but the close ratio tends to be quite poor.
The failure to generate a large number of high-quality referrals actually lies in the traditional method’s approach to the client. The traditional approach creates several roadblocks to getting referrals.
Roadblock No. 1
First, by waiting until the sale is complete and then asking for referrals, your client has not had the opportunity to prepare for your request. To the client, the request comes from out of the blue. When you approach your client with your request without giving them an opportunity to think about it, you have put them on the spot. You are only giving them a few seconds to go through their mental file cabinet. More than likely in this situation, they will not be able to immediately produce the number or the quality of referrals you want.
Roadblock No. 2
Even if your client takes a few seconds to think about it, they really do not know what you want.
It may seem obvious to you, but your client really hasn’t got a clue what a good referral for you might be. This may seem a little difficult to accept, but it is true. You assume that because you sell a whole array of financial products and services, your customer is immediately going to think, “Who do I know who needs or uses any type of financial advice, guidance or products?” Wrong assumption.
What they actually think is, “What does this person want from me?” Or, more likely, “How can I get out of answering this?” Without having defined for your client exactly what a quality referral for you is, you stand very little chance of getting quality referrals.
Roadblock No. 3
Third, the traditional method of “do a good job and ask for referrals” does not give your client a reason to give you referrals.
We make the assumption that if we have done a good job, the client will like and respect us and be willing to give us referrals. Again, this is far from the case. Most clients will not give good quality referrals just because they like you or because you have done a good job for them. You must give them a reason to give you referrals.