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To Ask or Not to Ask? Develop an Effective Referral Strategy in a World of Contradictory Advice

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If asking for referrals is the fastest, least expensive, most effective way to get new clients, why don’t more advisors proactively do it? Confusion is certainly one reason. Read enough articles and listen to enough experts on the topic, and you’ll find plenty of conflicting advice about how—and if—to ask for referrals. With so many contradictory opinions out there, it can be all too easy to give up on asking for referrals before you even start. But in fact, there’s no single correct way to ask for referrals. Rather, it’s all about finding a referral strategy that works for you.

Untangling the Contradictions
Whom should you ask for referrals, and when? Study the literature on this topic, and you’ll discover there’s no clear answer. Let’s discuss a few of the most common areas of dispute—and why you shouldn’t let them dissuade you from asking for referrals.

Ask or don’t ask. Recently, this debate has exploded in the financial press. Just reading the headlines, you might think that asking for referrals isn’t a good idea. In fact, research suggests that it may be risky only with super-wealthy clients (those with more than $10 million in investable assets).

Ask once or ask multiple times. Some experts recommend asking a client for a referral only once or occasionally. Others suggest asking the same client for referrals over and over again. In reality, the best approach depends on the advisor. Naturally charismatic types may be able to pull off asking the same client for referrals repeatedly, but most advisors probably need to tread more carefully.

Ask everyone or ask selectively. According to some sources, advisors should engage in 24/7 prospecting, asking anyone and everyone for referrals. Others recommend asking only your ideal clients. Again, the best approach depends on the advisor. When they’re just starting out, many advisors need to take “anyone who can fog a mirror.” More established advisors, on the other hand, are typically more selective about whom they take as clients.

Give referrals before you get or it’s okay to just get. Some say you can’t expect to get a referral unless you give one first. But giving a referral outside of the industry can be tricky. Naturally, you wonder whether the person you’re referring will be satisfied with the service you recommend. Plus, if it were true that you receive only after you give, wouldn’t advisors be getting far more referrals from the CPAs to whom they refer clients? If you find the thought of referring to others scary, you know first-hand why some clients may be reluctant to refer to you.

Wait for the right moment or just ask. Opinions differ as to whether it’s best to ask for


referrals at any time, or wait for the right moment—for example, when the client has just expressed gratitude. Here’s my advice: If a referral moment doesn’t just happen, why not create one? Simply ask a client who seems pleased about his or her level of satisfaction. When the client professes delight, a referral moment emerges.

Referral Best Practices
It’s important to remember that despite the contradictory advice you might hear a number of tried-and-true referral rules do exist. No matter your specific referral strategy, these best practices will help set you up for success.

1. Be referable. No one would disagree that to get a referral you must be referable. A referable advisor consistently does great work for his or her clients, and the clients recognize that.

2. Pay attention to tone of voice and body language. The nuances of your tone and body language account for 93% of how a referral request comes across to clients. The actual words are frequently less important than how you say them.

3. Take a proactive approach. Many advisors use the e-mail tagline “Don’t keep my name a secret,” or hang a sign in the office that reads, “A referral is the greatest compliment you can give me.” While these passive approaches can be effective, they pale in comparison to the results you get from proactively asking.

4. Seek first-hand introductions. If a client is willing to introduce you to someone in person (as opposed to providing a name for you to follow up on), your chance of success increases.

5. Set goals. If you set a goal of, say, asking 10 clients for referrals this month, you’re more likely to get it done and make asking for referrals a habit.

6. Tap clients who are natural referrers. Some clients actually enjoy helping you build your business. Socialites, salespeople and managers are likely to be natural referrers.

7. Tell referrers how you will interact with those they refer. Clients are often reluctant to refer friends and family for fear they will be hounded. Let your clients know what the referral follow-up process looks like.

8. Tell referrers about your ideal client. The more established your firm, the more clear you want to be with referrers about the kind of client you’re looking for.

9. Follow up swiftly. Letting referrals pile up on your desk before following up tells the


referrer you didn’t really want the referral after all. Following up within two days is a good rule of thumb. A written process that involves your office staff can help ensure prompt follow-up. For example, when you get a referral, who contacts the prospect? Who puts the name in the database?

10. Thank referrers in writing. This is a hard and fast rule: Whenever you receive a referral, thank the referrer in writing. How formally you do this is up to you; the most important thing is that the thank-you is sincere.

Referral Approaches
Finally, let’s review some specific approaches to asking for referrals. Again, it’s important to adopt an approach, or a combination of approaches, that works for you.

Mining your own database. Go through your client list and sort out those who came to you as referrals. Then, jump-start the referral conversation by reminding those clients of how you met them.

Automatic value-added discussion. Integrate asking for referrals into every client meeting by adding the line, “What value has this meeting provided you?” to the bottom of the agenda. When clients respond, ask if they know anyone else who would appreciate your services in the same way they do. This creates a referral moment.

“Can you think of … .” Being asked for referrals may put people on the spot, causing their minds to go blank. To stimulate clients’ memories, try asking about their colleagues or business associates. For example, if the client is a general contractor, ask him about the plumbers, farmers, or electricians he works with.
Agreement. When you bring a new client on board, explain up front that you will ask him or her for referrals in six months. The idea is that the client will receive such exceptional service from you in the first six months that he or she will happily agree to share your name with others.

Events. “Bring a guest” events can be quite effective at generating referrals, as long as you have the requisite event planning skills and creativity. You may even want to host a “booster club” event exclusively for those who referred you in the past year. Just keep in mind that, for this elite group of your biggest fans, the event should be very special.

Annual campaign. Rather than asking clients individually for referrals, send out two or three creative promotional items per year that relate to the referral theme, and follow up with calls. Clients will come to look forward to receiving something intriguing in the mail. Because referral campaigns can be implemented by staff, they require little involvement from the advisor.

By referral only. Adding the words “By Referral Only” to your business cards, website and all company literature is an easy-to-implement referral tactic. But it’s only a legitimate approach if all of your clients really do come from referrals.
Direct approach. Some advisors simply don’t understand all the hubbub about asking for referrals. They just ask and don’t worry about contradictions, best practices, or approaches. (They’re also probably not the ones reading this article.)

By now, it should be pretty clear where I stand in the ask/don’t ask debate. I truly believe that, when done well, referrals are one of the fastest, least expensive, and most effective ways to get new clients. Just remember, there are as many referral strategies as there are advisors. Rather than getting caught up in conflicting viewpoints, work on developing a referral approach that feels right for you and your clients.     

Joni Youngwirth is the managing principal of practice management at Commonwealth Financial Network®, member FINRA/SIPC, a registered investment adviser, in Waltham, Massachusetts. She can be reached at [email protected].


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