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What Triggers Referrals?

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In my first book, Prospecting Your Way to Sales Success, I proposed the “Change Principle of List Replacement and Development.” I wrote: “Other things being equal, a person or company in process of change finds additional change easier to make. Therefore, if you are able to extract names of people in process of change from a given list, the change list will produce better results than the list from which the change names were originally drawn.”

My theory of “change lists” was based upon a lot of observation and experience. It was focused, until recently, on developing lists for mass marketing. But I never saw hard evidence until just recently when I read The Power of Habit by Charles Duhigg. As you will see, the implications of the change principle are profound. By the way, I highly recommend Duhigg’s book.

The implications of the “change principle” go deeply into your practice, especially into why you get referrals and why some clients get referred to your competitors. The myths that surround referral marketing are thick and deep. I have dealt with them in previous Research articles, which are available free on my website.

In The Power of Habit, Duhigg describes work done in the 1980s by a visiting professor at UCLA named Alan Andreasen, who published a paper looking into the question of why some people suddenly change their shopping routines.

Duhigg writes: “Andreasen’s team had spent the previous year conducting telephone surveys with consumers around Los Angeles, interrogating them about their recent shopping trips. Whenever someone answered the phone, the scientist would barrage them with questions about which brands of toothpaste and soap they had purchased and if their preferences had shifted. All told, they interviewed almost 300 people. Like other researchers, they found that most people bought the same brands of cereal and deodorant week after week. Habits reigned supreme.”

As Duhigg notes: “Except when they didn’t.” It turned out 10.5% of the people surveyed had switched toothpaste brands in the previous six months. More than 15% had started buying a new type of laundry detergent.

Andreasen found an underlying reason for such deviations in buying patterns. Life changes—such as moving, getting married or divorced, losing a job or finding a new one, having someone enter or leave a household—resulted in consumers being, in Andreasen’s words, “vulnerable to intervention by marketers.”


What does this have to do with you? A lot.

If you are doing any kind of mass marketing, it says you should get bigger bang for your marketing buck if you develop lists of people in a process of change.

But it also explains what triggers most of your referrals, and it explains what triggers loss of clients. But I’m getting ahead of myself.

When do clients refer? Let’s look at two sides of the referral coin—referrals coming in and your client being referred to a competitor. The pathbreaking referral study was conducted by Julie Littlechild. Every FA should make this study required reading. It’s available online.

Julie surveyed investors to discover, among other things, when they referred.

After reading her study, I decided I wanted further insight from advisors. So I collected 26 referral narratives from advisors. I asked them to tell me what triggered the referral.

In the process, I discovered what I consider a more basic reason referrals happen. And it comes back to life change.

Case Studies

Here are some quotes from the narratives, slightly edited for clarity.

“Client is having some health issues. I asked that the family come to next meeting and then the kids became a client as well. Most referrals recently have come from existing clients who have had family members lose their jobs and need someone to handle the 401k rollover. Prospect was just laid off from his employer.”

“Retirement.” “Job change.” “Divorce.” “Death of a spouse.” “Inheritance.”

 “Husband of a client I had had for 13 years. First husband died and she remarried five years ago. Current advisor lost big last year against my strategy.”

“A connection’s mother died. Total estate value is $1.8 million. Her sister [executor] asked her sister [my connection] if she knew an advisor despite the fact that she had an account at [other company]. My connection asked for my card, which she passed to her sister [executor]. The sister hired me as her advisor to assist with her inheritance. My connection hired me as her advisor and their brother also hired me. So from my connection … three of the four family member beneficiaries hired me as their advisor.”

“One client spoke favorably of me at work and one of their colleagues asked who they worked with. A friend received an email from family member asking who they use for advice and this friend forwarded the email to me to contact sister.”

“Client urged wife’s family to move mother-in-law’s assets to me.”

“Client referred me to his son who is not very happy with his current advisor.”

“The new client was looking for a second advisor for a portion of his portfolio. The new client trusted the original client a great deal.”

“New client was looking to work with an advisor (as he had never used one) for a certain piece of the portfolio (preferred shares) and the existing client gave them my card. A client of mine does business with a supplier of his. He apparently has been telling the supplier for two years he should be doing business with me. The person recently called me up and wanted to meet, and then became a client. His former advisor had invested his money poorly and gave poor service, and in fact was a good friend of this gentleman, but he still made the decision to leave and come with me, even though he lives in another province.”

“New clients of mine, heard from somebody good things about me. They were dealing with somebody out of province, but wanted to deal locally here. They called me, we met several times and they became clients.”

“Client’s friend was retiring. She told her to call me and she did.”

“Client was dissatisfied with their advisor and told my client who arranged a dinner for us all to meet. Referral was approaching retirement and wanted some guidance, asked CPA who they should talk to. CPA asked her boss and her boss recommended me. CPA emailed me and told me to call referral. CPA let referral know I would be calling.”

Strategic Response

Do you see what I see? I bet you do, because it’s right there. In short, people tend to change advisors when (a) life changes (receiving a lump sum is certainly a life change) AND (b) there is dissatisfaction with one’s advisor or lack of an advisor.

That’s good news and bad news, isn’t it? It explains why your clients refer you. But it also explains why your clients can be referred to another advisor. Your strategy should have both a defense and an offense:

Defensive strategy. For years, I have recommended a “90-day no contact call.” A major reason people lose clients is “I don’t ever hear from my advisor.” The call helps minimize that cause of advisor dissatisfaction.

But on that same 90-day call, also ask about life changes. When you find any major life change, get all over it. Throw a warm blanket over that client. As noted earlier, life change means “vulnerable to intervention by marketers.”

Offensive strategy. About half of your clients have at least one other advisor. When a client you share with another advisor has a major life event, schedule a review. Ask the client to bring in all their statements. Move quickly to propose a plan to deal with the life change. Naturally, that plan will include moving assets to your management.


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