Imagine that you’re the prospect and the advisor tells you this: “Mr. Client, I’m compensated in two ways. First, I get paid through the products I sell. And second, I get paid through the referrals you give me.”
Sounds like a real turn-off, right? You’re not alone in thinking so. Yet many advisors, sources tell National Underwriter, continue to use ineffective and even aggressive techniques to try to pry referrals to friends and colleagues from clients. As a result, they not only fail to get the referrals; they risk undercutting the hard work they expended in winning the client’s confidence.
“Clients don’t want to feel obligated to provide referrals,” says Bill Cates, founder and president of Referral Coach International, Laurel, Md. “That can increase tensions in the advisor-client relationship. It can work against you.”
Why are clients reluctant to provide referrals? Commonly stated reasons, such as “I don’t know anyone” or “Let me think about it and get back to you,” often conceal misgivings that the advisor, in making the request, fails to address. Often, experts say, clients are uncomfortable with the exercise because they haven’t previously discussed financial issues with prospects and they don’t know what to say.
Others are concerned about protecting their contacts’ confidentiality or using their name merely for the advisor’s benefit. Still others don’t want to repeat previous experiences with insurance professionals who inappropriately used their contacts.
“When clients don’t provide a referral, it’s usually because they’re not sure whether they can trust you with their good name,” says Todd McDonald, a certified family business specialist and a principal of Broadstone Advisors, Albany, N.Y.
Adds Cates: “A lot of clients hold back because they don’t know how you will handle the referral. This is the big unknown for them. Their objection is an emotional, knee-jerk reaction to the risk they perceive in providing the contact.”
Personality, among other factors, may make the client more or less likely to refer, observers say. Cates categorizes individuals as somewhere on a continuum of “open” versus “guarded.” Those in the former category, being more outgoing or extroverted, tend to accede more readily to requests for referrals than the latter.
Similarly, women are more likely to refer than men because they’re “more relational beings.” This difference is especially evident in engagements involving couples. All too frequently, says Cates, the husband will resist requests for referrals, only to be countermanded by his wife.
Age may also make clients more or less likely to refer, but sources disagree as to the impact such factors play. Some say that older clients tend to be more “private”– and therefore less inclined to refer–than younger people. McDonald observes, however, that most of his referrals are generated by clients in their 50s and 60s.
Demographics aside, sources note that advisors often have only themselves to blame for failing to secure introductions. Many inexperienced life insurance professionals ask for referrals before they’ve fully earned the client’s trust. The issue may not simply be about timing: Having purchased a product or plan, the client may believe the advisor, though competent, has done nothing extraordinary to merit a recommendation.
“Clients have to make a determination that you’ve provided them with an exceptional level of service,” says Matt Anderson, president of The Referral Authority, Madison, Wis. “Otherwise, there is nothing for them to recommend you. They may object to providing the referral because all you’ve done is your job.”
When expertise or quality of service isn’t at issue, the manner in which the advisor requests the referral may be. Saying, for example, that referrals are a component of one’s compensation or that they’re necessary to grow one’s practice is counterproductive, sources say, because the conversation is now about the advisor, rather than the client.
“You want to make the referral client-centered,” says Cates. “You want to secure the referral based on the value to be provided. That can make all the difference in terms of how clients react to requests.”
Thus, shifting the focus of the request for the recommendation is key. Using such phrases as “I’ve never met anyone I couldn’t help” or “I would love the opportunity to help the people you care about,” says Anderson, can help to reorient the request, lending it a more positive tone.