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Practice Management > Building Your Business

The Referral Guy

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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.

What happens is, many people on that side of the business don’t understand insurance. What I do is educate them on fixed annuities and life insurance. And partner with them and do a split business. I emphasize to them that this is “insuring your book of business.”

Before 151A and all that happened, most stockbrokers didn’t know much about fixed annuities. I say to them: “You should take 5 percent of your business and roll it into fixed annuities. So, if the market did turn down, you have that portion in something safe.”

I don’t know many in this business who work with other financial advisors. Some don’t want to do that as they look at everyone as competition, but I see it as a win-win. At the end of the day, we’re both being compensated, and the client is getting the best service possible.

I have about 200 advisors in my database that I’ve worked with over the years. Some I’ve stayed with since I got started in the business. Others … well, we might work together for two to four years, and once they get a better handle on the insurance side, we might part ways. Typically, the people I partner with are independent financial advisors, with 20-plus years of experience. They were stockbrokers, and moved their business to being money managers. I call them “in-betweeners,” because they don’t have a true identity … the industry has changed so much.

Channel 4:
Community leaders

I have found that working with community leaders is a great source for business referrals. They have already established themselves and accomplished so much. People in the community know them and trust them. I’ve made friends with very influential people: I call them “centers of influence.” I don’t ask them for referrals, but they see that I’m passionate about the business I’m in, so when they know of someone who needs financial advice, my name will come to mind.

I joined a group locally within the Gwinnett Chamber of Commerce, the Chairman’s Club. Being a part of that group helps me build credibility to these people. They see me as a different person. A lot of our business is charitable … we’re raising money for charities and they’re not looking at me as a financial advisor.

For many people in sales, they may look at this type of community work as a waste of time. They don’t see the instant gratification in it. In some cases, it has taken many, many years to develop relationships. I can take
clients to a meeting, and they see that I know these famous leaders, people of influence that I’ve known over a long period of time. It all helps in building credibility. I look at it this way: Rome wasn’t built in a day, and if you want your business to last, you have to lay the groundwork.

Don’t miss more of Jay Grubb at this year’s Senior Market Advisor Expo, where he will talk about “The Best Referral Techniques EVER” during his session on Tuesday. Click here to learn more about Jay’s session.


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