Why Asking for Referrals Doesn’t Work

Dear S.W.,

The direct answer to your direct question is “yes.” I am seeing this shift toward helping advisors find new opportunities within their existing client base and being measured for doing so. It is fairly common among larger and some smaller financial services and advisory firms. It’s been long known that most growth comes from existing clients either expanding their relationships, or bringing friends, family members and colleagues to their advisor when they need help. In many cases advisors, like yourself, see this as a natural process that evolves and in some cases it is. But advisors need help, training and focus in order to do this well and be comfortable with it.

I have run sales organizations for decades and have never been a big fan of the “numbers for numbers” approach wherein if you didn’t talk to the requisite number of clients this week and ask for the referral you are somehow not doing your job. I’m afraid it puts the emphasis on the wrong things. For example, sometimes a sales manager will count the number of calls someone makes, but not the reaches and direct conversations. Or they want to see a certain number of conversations but there is no guarantee the conversations are substantive.

I agree with your pushback on the way you are currently being measured.

The most important part of your inquiry is the process itself. Whenever an advisor tells me they are hoping to increase referrals, I get the image of a guy who came to my house once to clean my carpets. He was a nice guy and did a great job, but when I complimented him at the end, he asked me to write down the names of four of my close friends along with their phone numbers so he could call them as “referrals.” This was very unpleasantly because most of my friends are like me – very busy.

When it comes to finding opportunities in your client base, change your way of thinking. There are a few things I tell advisors:

1. Don’t think about this as helping you. Yes, I read your note and I realize you are being measured on this but the idea that someone would give up a name because you (like my carpet guy) are doing something you are getting paid to do, and doing it well (as you should) always strikes me as off base. Instead, consider that you are doing something to help the people your client cares about. You do this work in order to help people fix problems, achieve dreams and reach goals. Who else in the community they travel within could you be doing this for? Reframe the dialogue and expectations.

2. Don’t ask for a referral. Extend an invitation. Advisors tell me they are worried the client will say “no” when they ask for a referral. I’ve thought long and hard over the years about what that dynamic really is. I liken it to a party invitation. There is a chance to come and be with the cool kids at your firm and join you in a successful journey to financial liberation. Isn’t that a great invitation to extend? And the best part is that invitations can be turned down without anyone feeling badly or dismissed. Change the language and use “I’d like to invite….” Rather than “Who else do you know like you?”

3. Be proud of what you do. You help people. You want to help more people. You believe you are a better option than many of the other choices available out there. This isn’t selling. This is informing. This is raising awareness. This is being kind. If you don’t let people know what you are capable are, are you really helping? Or are you hurting them by keeping it a secret? Change your mindset and attitude and realize you offer something of value. Let those who should know, know.

Dear Bev,

I find the concept of pushing clients to help us grow our business distasteful. I enjoy my gym very much, but the day they start stopping me at the front desk and asking who else I know that should be a member there, is the day I stop going.

Why do we think this is appropriate to do to our clients? Most are paying me a 1% fee and they get a deservedly high level of service as a result. I tell them the fee isn’t enough? They need to do more for me?

I have become uncomfortable with the concept.

G.C.

Dear G.C.,

Many of the comments I made to the first reader in this article apply to what you are saying. But I would ask you to change your frame of reference even more in reading some of the comments you’ve made. The gym likely does ask you who else you know. If you are paying attention they probably do give gift cards and free classes for members to bring friends. It is not a unique concept to ask people who enjoy what you offer to tell others they care about. As an aside, I’ve brought multiple friends and colleagues to my boxing gym for this very reason. If I enjoy it, people I know might too.

In the financial advisory world, it is particularly important for clients to be free to make others aware of what their advisor does for them. Think about how often you hear someone call themselves an advisor even though they don’t do as much as you do. Maybe they are “just” selling product like insurance or banking. You might get irritated there is no common definition or that the services provided by different advisors are not clear and easily understandable. When you recognize this, and you are in the industry, think about how hard it is for people who need financial support to know where to go, and how to choose an advisor. Weeding through options and finding the right fit is no easy task for many people seeking help.

I consider it an ethical responsibility that advisors have to let their clients know they are taking on new clients, and what they will do for them, and how they will work with them. The client doesn’t have to respond, and their friend or family member doesn’t have to work with you. But at least you’ve made them aware you care, and you want to help wherever possible.

Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. The firm also founded and manages the Advisors Sales Academy. She is currently an adjunct professor at Suffolk University teaching undergraduate and graduate students Entrepreneurship and Leading Teams. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).

She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.

Read more articles by Beverly Flaxington