One of the big misconceptions in the advisory business is that clients refer new business because the advisor asks for the referral.
“But that’s not it at all,” says Stephen Wershing, author of “Stop Asking for Referrals,” newly released by McGraw-Hill. “As social beings we refer all the time, but we don’t appreciate [them] so we attempt to hijack the process for our purpose.”
Wershing, a CFP and former financial advisor and now principal of the financial advisor-oriented consulting firm The Client Driven Practice, cites social network research by Scott DeGraffenreid suggesting a more personal motive for referrals.
“We refer because it increases our esteem in the eyes of our peers,” Wershing told AdvisorOne in an interview. “We do it because we like to be the answer guy. It’s social currency. It expands our networking.”
While it is true that referrals are key to business expansion, asking for them is ineffective because it is not likely you’re asking precisely when the client’s friend is in need of your services. The better approach, Wershing says, is to prepare your clients for the opportunity to refer by taking up residence in the client’s brain.
“First, understand who your ideal client is—and we tend not to do that well. Second, satisfy a need that makes you different from the rest of the advisor population. When the client’s friend describes that problem that you solve, you’ll come to mind.
“It’s almost Pavlovian—you become the answer to the Ghostbusters’ question: ‘who you gonna call?’”
Finding that differentiation is one of the biggest challenges advisors face. Spending as much time as he does with advisors, Wershing says it’s impossible not to notice that most tend to give the same pitch. But if they specialize in say, helping corporate executives diversify a portfolio of concentrated illiquid securities, then by solving that problem they’ve earned the right to solve all of the client’s other problems.
It needn’t be a strictly financial problem that the advisor solves. The advisor can be an expert in grief issues that new widows face. Wershing cites an advisor whose website is a comprehensive resource for the financial, legal and emotional issues surrounding divorce. After a client seeks that planner’s help with a divorce, initially, the planner has earned the right to address the client’s other issues.
Perhaps the best, and often overlooked, way to discover the unique value an advisor provides to clients is through client advisory groups.
“We think all the financial stuff we do is important to clients. But it might be the kind of experience we provide to them. They might choose one advisor over another purely for service reasons because they assume the technical expertise [advisors provide] is all the same,” Wershing says.
“If you ask people what’s the most valuable service you provide, I promise you they won’t say rate of return,” Wershing adds. “Even if advisors have a good idea of what’s important to clients, it’s good to get it in their words. We tend to talk in jargon. If somebody asks, ‘Why should I hire you?’ it can be very powerful to say ‘Let me tell you what our clients say about us.’