The Referral Guy

New business. It’s the lifeblood of any practice. Successful advisors have a well-oiled referral pipeline they use to generate leads and, ultimately, new clients. Do you find yourself spinning your wheels in building your referral business?

If so, it’s time to hone your skills. Jay Grubb, of Buford, Ga.-based Key Financial Partners, has a unique perspective on referrals–he has made them the central part of his business. On Aug. 25 at this year’s Senior Market Advisor Expo, Grubb will talk about his success and how he has utilized referral channels to grow his business. On the following pages, learn how Grubb (in his own words) has developed a multi-million-dollar referral practice.

Channel 1: Clients

You couldn’t ask for a better source than your current clients giving you a referral. If you do something good for a client, you couldn’t pay for advertising that works as well. There are ways I’ve found to get clients to refer your business. First, you have to gain their trust. Be their trusted advisor.

I have found that clients like to know how you get paid. I let them know that the main way I get paid is through referrals. It’s not a direct payment, of course, but their referral will lead to my next paycheck.
On the first appointment, this is how I explain to the client my compensation. It usually goes something like this:
“Before we go any further in our discussion, it is important to me to explain how we are paid. We are compensated for our work in three ways.

1. “The first is from the fees we charge. We charge a flat fee that includes a full year of service. The fee ranges from $0 to $10,000, depending upon the complexity of the situation. All of our fees are quoted in advance. And, unlike your attorney or CPA, we do not bill hourly for our time. (Typically I don’t charge unless the client is worth over $10 million.)
2. “The second way I am compensated comes from the products we sell. We offer the same quality financial products that you can access through most major banks, brokerage firms and insurance organizations. I can’t create the need for a product–the facts of your situation will determine that need. If there is a need and you decide to satisfy it with a product, I expect that you would purchase that product through me.
3. “Finally, and most important to me, I am compensated from what I call your active good will. As I mentioned earlier, I’m currently involved in an active effort to grow my practice. As a result, based solely on your total satisfaction with our work once it’s complete, I will ask you for your help in identifying and introducing me to people like yourself who might also benefit from our services.”

Channel 2: CPAs and attorneys

The products I work with are fixed annuities and life insurance. Nothing else. So I have found an opportunity in partnering with CPAs and lawyers by getting to know them and establishing the type of client they work with. I don’t have a securities license and the CPAs and attorneys I work with typically don’t do insurance business. When I got started in this business, I realized there was a gap that could be filled. So, I meet with CPAs and tell them it’s in their best interest to get a percentage of their client’s assets in fixed products. My pitch to a CPA, for instance, would be, “When the market does good, your client is not going to lose any money. When the market does bad, they’ll thank you for referring them to me.”

The way the relationship works between me and the partners is we either have to set up a compensation plan or a partnership where the CPA or attorney gets a referral fee, or you can set up a partnership where the attorney or CPA gets compensated for the referral.

I’ve found that most want to help out, they just don’t know how. If you can get the right experts in place, it’s the best situation for the client.

Channel 3:
Other advisors

In looking over my business, I would say that 90 percent of my work is joint work with other financial advisors. I have found that once you establish a relationship with another financial advisor who has a different area of expertise, then they will bring you business, referring their clients for you to provide service on the insurance side of the business. Think about independent financial advisors, in particular the ones that focus on securities. Typically, the drop-off each year in their book of business is, on average, 3 to 5 percent, due to transfers, finding another advisor or situations where the client passes away or moves out of state, etc. Things happen. In this economic environment, it’s now a lot higher. I would say it could be as much as 15 percent.