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Practice Management > Building Your Business

The text that turned into a $2 million referral

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Savvy golf fan that he is, Rich Schuette, CFP, knew that bringing his cellphone into a golf event like the Masters would be a big no-no, grounds for an immediate and potentially very public ejection from the hallowed grounds of the Augusta National Golf Club. So, only after returning to his car following a day of spectating during the Masters tournament this past April did Schuette get to his phone to see the text message.

This was the kind of message Schuette, founder of Avalan Wealth Management in Santa Barbara, California, welcomes wherever he happens to be. It came from an accountant friend of his who wanted to broker an introduction to someone who happened to be in the market for a new financial advisor.

After returning from Augusta to California, Schuette promptly converted the lead his CPA contact had provided into a new client for his five-year-old firm, which manages close to $100 million in assets. “That text turned into a $2 million referral,” he recalls.

For Schuette, referrals have been so effective at generating new business that he doesn’t bother with seminars, media advertising, direct mail, cold calls and other forms of prospecting. “I can’t remember any business coming through my door that wasn’t introduced to me,” he says. “My practice was built 100 percent on referrals.”

One of the beauties of referrals, he says, is that the people who provide them—for most advisors, either clients or professional centers of influence—“are working on your behalf, whether you’re working or you’re sitting at Augusta like I was that day.”

“If you have happy clients and centers of influence that feel comfortable referring to you, they’re on the lookout, in essence. They’re your extra eyes and ears, an extension of you and your firm,” echoes Joe Heider, ChFC, CLU, founder of Cirrus Wealth Management in Cleveland, a firm with some $300 million in assets under advisement that, like Schuette’s, relies on referrals for “virtually all” of its new business.

“Across the board, most successful advisors get their best business from referrals,” observes Maribeth Kuzmeski, who heads Red Zone Marketing, a financial advisor-focused marketing and management consulting firm in Grayslake, Illinois “They’re the lifeblood of most financial services practices.”

The challenge for many advisors is keeping that lifeblood pumping at healthy levels. Referrals typically don’t happen by accident. Rather, they’re the product of a methodical, thoughtful and focused strategy, Kuzmeski asserts. “You have to get a lot of things right.”

There’s a right and a wrong way to go about generating referrals. The mindset, approaches and habits to which referral-focused advisors like Schuette and Heider subscribe can be adapted to work, whatever your specialty, your market and your target clientele.

Influential friends

The most effective and readily convertible referral leads are those that “come from somebody who has credibility and authority, somebody who others will listen to and, usually, somebody who is successful,” says Kuzmeski.

The people who typically fit that profile are a prospect’s peers and the professionals whom they rely upon for advice.

“It’s best to focus where you’re going to get the best opportunity to close the deal that’s put in front of you,” Schuette says. Which is why he’s “hyper-focused” on garnering referrals from professional centers of influence: estate planning attorneys, CPAs, mortgage brokers, and insurance agents in the property & casualty and life segments. “We spend much of our prospecting energy on developing those relationships,” he explains. “That means a lot of golfing, a lot of lunches, a lot of continuing education, and a lot of putting people in our network together.”

Oftentimes, at least in high-net-worth spheres, these centers of influence are professionals with whom an advisor works as part of a client’s team. In that context, says Heider, “they can see your skills and how you perform, they can understand your philosophy, your service plan and how your deliver it, so when the time comes, they’re comfortable enough with you to hand out that referral.”

Building the kinds of professional relationships that lead to referrals involves extra time and effort, Schuette says. “It’s a matter of making a point to get to know these people on a deeper level. That requires a lot of touches and a lot of communication.”

Maintaining that referable rapport once it is established is a matter of making sure leads flow in both directions, adds Heider. “It’s important to remember that they’re looking for referrals from you as well.”

Client connections

Your current client base is also fertile territory for referrals. Unearthing them starts with carefully identifying the best candidates to ask. “Not everyone in your book of business is going to be a good referral source,” Kuzmeski says. “Only a small percentage of your clients have the network, the credibility [with their peers] and the propensity” to provide referrals.

While it’s obvious that satisfied clients make the best referral sources, it’s not always obvious which clients are most satisfied. To find out, she recommends advisors regularly survey their clients to gauge the extent to which they’re meeting expectations.

In vetting potential referral sources, it’s also vital to consider the type of people you want as clients. Is it worth your while to attract people who are wealthy but exceedingly difficult to do business with? “You want to work with people you genuinely like,” says Schuette. “So you need to ask people you like to introduce you to their friends. Because ultimately, if you let economics dictate who you pursue, you end up working with more people you don’t like.”

Having a track record of success serving specific client niches creates opportunities for advisors to further mine those niches, notes Heider, whose client base is heavy on privately held business owners and physicians. “People with similar socioeconomic backgrounds, and with similar professional and personal interests, tend to hang out together, and when they discuss the good work you’ve done for them with a friend who’s in a situation similar to theirs, that endorsement resonates.”

To spark these kinds of endorsements from clients, “remind them about the work you have done for them, and let me them know you’re interested in helping other people in situations like theirs,” Kuzmeski suggests. “Ask them, ‘Is there anybody you know who might benefit from the kind of work I’ve done for you?’ You’re showing them a path to providing a referral, where it’s not, ‘Who do you know that can help me?’ but, ‘Who do you know that I can help like I helped you?’”

Put careful thought into how, when and where you ask for referrals. For Heider, it’s often a “casual, low-key kind of ask” at the close of a constructive client meeting. Situations where a client compliments you on your work also provide an opening, says Kuzmeski. “That’s where you can say something that’s not too salesy like, ‘We’re looking for a few new clients—people in situations like yours that we might be able to help.’”

Outside the office, social settings provide an easy, informal and organic platform for referrals to blossom, says Heider. “I’ll invite a client out golfing, and ask them to bring a friend along.”

Whether on the golf course, over a meal, or in some other setting, Schuette says he’s always looking for ways to deepen the relationship with clients who are inclined to provide referrals. To that end, each quarter, he hosts “a high-end, no-holds-barred dinner” for certain hand-picked clients. While the event is strictly social, with “absolutely no pitch or presentation,” he explains, the only caveat is that invitees must bring a friend.

As fat as the tab tends to be—$5,100 for his most recent event—the dinners typically pay for themselves many times over, Schuette says. “We’ll usually get between $1 million and $3 million in new assets [under management] as a direct result of these events.”

A referral a day…

For advisors like Heider and Schuette, keeping the pipeline consistently full with referral leads is a matter of committing to follow a set of habits and practices designed to give clients and professional contacts opportunities to endorse and introduce you to people they know.

“It takes preplanning,” Kuzmeski says. “A big part of it is to remind yourself during the course of the day to think about referrals and what you need to say and do to get them.”

That applies to direct interactions with clients as well as to other indirect-yet-effective pathways for generating referrals. Schuette makes a point to put the referral discussion on his client meeting agendas, for example.

Heider relies on the public eye to augment those direct client asks. “We try to be out in the media,” he explains. “An appearance [on television or radio] doesn’t always generate direct business but it makes referral sources more comfortable with us. We’re always looking to build credibility and to make it easy for referral sources to have talking points for friends and professional associates.”


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