My most requested speech last year was on mastering referrals. After some 30 years in the business, I’m still surprised to find such a large gap between the number of advisors who claim that they work either primarily or exclusively by referral, and the number who sheepishly confess in one-on-one settings that they can’t remember the last time they actually asked for a referral.
These advisors may be somewhat embarrassed because they intuitively sense that asking for referrals is — or would be — a highly effective means for growing their profitability and building a truly great business. Recent groundbreaking research by CEG Worldwide confirms this intuitive notion of the extraordinary value generated by directly and regularly asking for referrals.
In 2007 we undertook an extensive study of 2,094 financial advisors including wirehouse brokers, independent broker-dealer representatives, and registered investment advisors. The study found that compared to their peers, the group containing the most successful advisors had nearly three times the net income and nearly twice the income growth rate. Significantly, 65.9 percent of these elite advisors asked clients for referrals on a regular basis, while their non-elite peers did so only 1.8 percent of the time. Put differently, the elite advisors were 37 times more likely to regularly ask for referrals.
The 12-Step Referral Process1. Set the stage to ask, by telling the client that the time you spend marketing detracts from the time you have to help the client.2. Ask for the referral.3. Ask for additional referrals.4. Collect the contact information for the person or people being referred.5. Ask for a personal introduction to the person or people being referred.6. Commit to the client that you will follow up on all of his or her referrals.7. Wrap up the meeting by thanking the client and repeating your ideal client goal.8. Thank the client with a handwritten note.9. Call each prospect.10. Send a letter to each prospect to prepare him or her for your first meeting.11. Let the client know the result of your meeting.12. Thank the client again.
Not the Same ThingI frequently hear something like this from advisors: “Well, I don’t actually, regularly, ask my clients for referrals, but I do make it clear to them in other ways.” For example, some advisors put a tagline on their e-mails or business cards, or on a sign near their receptionists, saying, “We greatly appreciate your business; the greatest compliment you can give us is a referral to a friend or loved one.” Sorry, but that’s just a weak-kneed and ineffective substitute for looking clients in the eye and directly asking.
Why is asking for referrals so difficult? First, there’s the fear of rejection. We fear a client might say “no,” or might somehow be offended by the request. Second, asking for help simply puts most advisors outside their comfort zone. No matter how many times they’ve tried, no matter how many different techniques they’ve been taught, they’re just not comfortable asking for business.
The Interior ShiftSince regularly asking for referrals is such a huge differentiator between elite advisors and those who merely make a good living, it’s absolutely crucial that you get over the hump and start asking. We therefore recommend a two-pronged approach that involves both making an interior shift, and an exterior one.