Welcome back to the 153rd episode of Financial Advisor Success Podcast!
My guest on today’s podcast is Dan Allison. Dan is the founder of Feedback Marketing Group, a marketing and sales consulting firm that helps financial advisors to increase their growth by teaching methods to actually generate more referrals from existing clients.
What’s unique about Dan, though, is the way he approaches the challenge of referrals with a background in clinical and behavioral psychology, an approach that’s focused specifically on how to reduce the client’s own mental and other barriers to make it easier for them to provide effective referrals in the first place. Based on his discovery that, in the end, the problem for most advisors is not that their clients aren’t referring them actively, but that there’s a gap to be closed between how often clients refer and how often that referred person ever actually follows through to contact the financial advisor for help.
In this episode, we talk in-depth about Dan’s approach to referrals and the five key points he focuses on helping to generate more and more productive referrals:
- Making sure that you are really offering the services your clients want and would be willing to refer, recognizing that, unfortunately, not all advisors actually provide services worth referring in the first place;
- Ensuring that clients are well educated about your firm and the full breadth of what you really do, given that clients will often only think of their advisor services based on what the advisor did for them personally and not actually the full range of the advisor services;
- Communicating that you’re actually looking to help more people and have capacity, and the kind of people that clients should be trying to spot that would be a good fit for you;
- Working with the client to figure out if they do refer someone, what their introduction strategy will be to ensure that you’ll actually be able to connect with and have a chance to help that referral; and
- Categorizing your own clients to figure out who the potential referral goldmines might be, and more importantly, who the referral landmines are that, once identified, you’ll simply know not to ever have the referral conversation with anymore.
We also talk about the fundamental dynamic of client referrals themselves. Why the “I get paid in two ways” or “the greatest compliment you can give me is a referral” and similar approaches that try to guilt clients into feeling like they should be obligated to give their financial advisor referrals is mostly doomed to fail, the difference between transactional referrals versus relationship referrals and how the very nature of client referrals has changed as the financial advisor business model has changed, but why even in a relationship model, it’s not enough to simply serve your clients well and wait, hope and pray that they’ll start sending you referrals, because, as most advisors know, that often doesn’t really happen in reality.
And be certain to listen to the end, where Dan shares some of his own journey as someone who built and sold an incredibly successful business while still in his 20s, the somewhat random way that he landed in the financial services industry, with a background in psychology and mental health, but how in the end, the career of being a successful financial advisor is all about that mental game of preparing yourself, not for the sprint of launching your firm but for the marathon of building a successful practice over the years and decades to come.
What You’ll Learn In This Podcast Episode
- Why, Precisely, Asking For Referrals Is So Awkward [05:04]
- Dan’s Path Into The Industry And How He Figured Out Why Advisors Don’t Get Referrals [14:16]
- How Dan Says Advisors Can Bridge The “Referral Gap” [24:28]
- Dan’s Five Factors For An Effective Referral Relationship With Clients [28:55]
- How Dan Helps Advisors Break Down Their Referral Logjam [37:59]
- How Advisors Can Cross-Educate Clients In A Non-Awkward Way [50:13]
- How Dan Says Advisors Should Be Actually Be Describing Their Ideal Clients [1:01:12]
- The Most Important Piece Of the Referral Relationship [1:14:38]
- The Proverbial Elephant In The Referral Room [1:25:08]
- What Dan Does And How He Helps Advisors [1:33:18]
- What Surprised Dan Most About Building A Business [1:38:58]
- What’s Next For Dan And What Success Means To Him [1:46:41]
Resources Featured In This Episode:
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Michael: Welcome, Dan Allison, to the “Financial Advisor Success” podcast.
Dan: Thank you very much, Michael. It’s really great to finally connect with you.
Michael: I’m looking forward to the discussion today and this whole phenomenon of talking about referrals. I started in the industry as a life insurance agent and was taught the old saw, “I get paid in two ways. The first is the compensation that my company gives you for the products and solutions that we bring to you, and the second is working with more great folks like you. So I would love to know if there’s anyone else that you know that you can refer me to that I might be able to help.” And it felt horrible then. It kind of feels horrible now to say. Maybe there are people who have polished that speech slightly better than what I just did. But that whole phenomenon of asking for referrals I think still feels really awkward to a lot of people. And I know just you’ve done a ton of work in this area and have this whole framework of getting referrals, as you put it, of earning referrals, which I love as a framing. And so I’m excited to talk today around just the phenomenon of referrals, how you actually get them and maybe a little like, what we do wrong that we need to stop doing to make this work better and feel less awkward in the process.
Why, Precisely, Asking For Referrals Is So Awkward [05:04]
Dan: Yeah, I definitely am excited to talk about that. The one that you just said, “I get paid in two ways,” over the years, we’ve interviewed thousands of clients. And when we asked why they refer, I’ve yet to have somebody say, “Because my advisor gets paid in two ways. That’s why I refer.” And I don’t think I’ll ever hear it.
Michael: And I think frankly, that’s part of even what’s always bothered me about the conversation in and of itself, aside from just the…I don’t know how much this connects to clients, just this literally like, is the point I really want to lead off with clients like, “Hey, just to make it clear, you don’t pay me enough? I’m entitled to more.” There’s even something that feels weirdly bizarre around that. I don’t know, if I was in the client’s shoes, the first thought that would be going through my head is like, “Is there a way that I can just pay you enough in category number one that we never have to have this conversation about category number two again? Like, can we just get you paid enough in the first place?”
Dan: Yeah, actually, bump my fees up 10 basis points, but just promise me you never say that to me again.
Michael: Yeah, yeah. I think it’s part of this overall mentality I feel like the industry has sort of had, that the way you get referrals is like, you ask for them, and then if people are reluctant, you basically try to guilt them into it. Like, “Come on, I’m entitled to it. I did all this work for you, and I get paid in two ways and you’ve only paid me the first way so far, so you must owe me more referrals.” Which to me just speaks to how painfully awkward and challenging referrals are, because the whole industry has evolved this script that says, “You need to guilt-trip people just to get them to give you some names.”
Dan: Yeah, as I’m sure we’ll get to, I’m an outsider to this industry originally. I came from a totally different one. But when I look at the typical scripts that are popular, “I get paid in two ways,” “Don’t keep me a secret,” “The greatest compliment you could give me is a referral to your friends and family,” if you boil them all down and you lump them all together, it would have you believe that a client’s motivation to make a referral is to be helpful to their advisor, which if you think about it is kind of ludicrous. Clients refer for the same reason they would in any other industry. And that is simply, somebody I care about is going through something. They need some guidance or some help. I know somebody and trust somebody to deliver that help to them. And I want to ensure that the outcome they get is the help they deserve. Yet, when you look at all the language we’re taught in the finance industry, it’s about, “Help me, I get paid in two ways.” And I think that’s because a lot of the referral language was created 30 or 40 years ago when the industry was very transactional.
And if you think about it, I made the sale, I got a commission, I’m going to say this high-pressure thing to try to get names out of this person, because what is my worst-case scenario? That client is kind of offended, uncomfortable and doesn’t talk to me again, which I kind of already planned on. I already made the sale. I made the money, right? And I think the industry has really evolved into a deeply relational business. And when I talk to that client, I’m going to see him again in six months or three months for a review, I can’t afford to utilize this language that is very high-risk in harming the relationship, creating awkwardness.
So I find it’s almost evolved so far, especially in the space that I work primarily, the RIA space, it’s gone so far the other direction that they almost avoid the topic entirely. Because when they think about…I’ll tell audiences, “When you think about the act of asking for a referral, what comes to your mind?” And the words, it’s just “terror,” “discomfort,” “awkwardness.” And it’s because they’re thinking of all those old transactional methods of asking. And I don’t think the referral conversation has evolved along with the industry. I think the training is still from 30 years ago.
Michael: I think you have a fantastic point there, that our roots are in this transactional world where you already did the transaction. It’s over. So like, “Yeah, what’s the downside of doing this totally awkward ask? Either they won’t call me again or I won’t call them again. But either way, I already got the transaction. So I’m probably wasn’t going to do any more business with them for months or years or ever anyways.” So it’s a good point. It kind of reverts back to, well, the rest of what we often got taught in the sales transactional world of cold calling and the rest, it’s just a numbers game, right? We’re back to game of numbers. So it’s a game of numbers for, “How many nos can I get through before I get to a yes when I’m cold calling or cold knocking or whatever it is? And how many nos do I have to get through in asking every single doggone person for a referral in whatever way I can even partially guilt them to do it? Because if they say yes, I get a referral, and if they say no, it doesn’t really cost me anything because I wasn’t in an ongoing relationship with them anyways.”
Dan: Completely. I liken it to, everybody in college had the one buddy that wasn’t scared at all to go up to the girl and ask her out, because if you got rejected eight times, he’s going to get a yes once. And I was always kind of the guy that was terrified to even have the conversation. So I never went out on a date with anybody. And somewhere in the middle is the right answer. But those guys that are hardcore, “Every no I get I’m closer to a yes,” I’m finding fewer and fewer of those folks. And what I find, Michael, is…it’s interesting, the people that are really hardcore salespeople that are out to just make a sale, earn a commission, they deserve referrals, from the client perspective, the least. There’s no relationship there, there’s very little value there, but they ask the most, for the reasons we talked about. But then you look over on the other end of the spectrum, these fiduciary advisors who always put the client’s needs before their own, they have this model that is right for the client, they deserve referrals the most, and they ask about it the least. And I find that a really interesting paradox.
Michael: Well, and that I think there is a…there’s sort of an unfortunate challenge the other end, which is, the subset of advisors that have this mentality like, “I’m doing all this awesome work. Look at all this value I’m creating for clients. They should just naturally want to refer me. My awesomeness should speak for itself.” And yet they struggle on the other end, right? I know a lot of firms that do awesome stuff for clients. And on paper, one would hope like, “Clearly, this advisor must be rolling in referrals because look at all the awesome work they do with their clients and the depth of the relationships that they have.” And then in practice, they’re not growing, they’re not getting referrals.
And I see a lot of firms that are really frustrated. Like, “We do all this awesome stuff for our clients and we’re not getting the referrals either. And I don’t want to go ask them for referrals and point out, ‘There’s a second way you could pay me besides your advisory fee.’ We don’t want to go down that road.” But we seem to get stuck at these, I don’t know, polar opposite extremes. Like, “I’m playing the game of numbers. I’ll risk every relationship because it wasn’t much of a relationship anyway. And hey, some of these are bound to work out,” game of numbers, or we’re at the other end, like, “Look at all the awesome stuff that I do and the great relationships that I have, but why aren’t referrals showing up for me? What’s going on?”
Dan: Yeah, there’s a huge disconnect there. And over the last…I’ve owned the company. I think I started it about 17 years ago now. And over that time, we’ve worked with firms all throughout North America, Europe, Asia, Australia. We’ve worked with firms that have maybe $100 million of assets up to $50 billion. And the one thing I find they all have in common is this is one topic that they equally struggle with. I don’t care how new they are in the business, how long they’ve been in the business, how big they are, the majority of firms, and when I say majority, I’m not talking 55%, I’m talking 95%, 98% of the firms that we work with, when we look under the hood, their strategy behind referral is wish, hope, and pray. “Let’s just try to deliver as much value, let’s do some cool client appreciation events, and let’s just hope that leads to more referrals.” And they’re always disappointed by the results of those things.
Michael: So I love this framing of, there are transactional referrals or referral strategies, and there are relationship referral strategies. And that our models have basically gone from…we’ve gone from a transactional world to a relationship world, and we’re still lugging along these like antiquated transactional referral strategies and not approaching this as relationship referral strategies. So I guess, is that a fair characterization? And if so, what are my relationship referral strategies that I need to start adopting and doing?
Dan’s Path Into The Industry And How He Figured Out Why Advisors Don’t Get Referrals [14:16]
Dan: Yeah. And that kind of is the entire framework, where we have come into the industry and kind of looked at this whole topic differently. So, like I said, we started 17 years ago. My original background, though, was in clinical and behavioral psychology. So I had a company in that industry. My partner and I built it up to be a pretty substantial-sized company. And we sold it. And I entered the…during my non-compete clause, I ended up buying a few financial firms in various sectors of the financial industry. But financial advisors were one large segment that we worked with. And when I looked at, “How do you want to build your business?” I always asked advisors a lot of questions trying to understand, “What’s it like to be a financial advisor? What are your struggles? What are your biggest challenges?” And I never met a financial advisor, when I talked about business development and growing their practice, I never met one that said, “I really wish I could do more seminars or more cold calling or prospect or the social networking with the tips, events, or referral groups.” All of them said, “I just wish I got more quality referrals from my clients.”
And when I would ask them, “How many clients do you currently have?” And they would say, “300.” And I would say, “How many referrals did you get last year?” And the numbers, Michael, they would say, “Yeah, maybe 10.” And I would ask a really simple question, “Why do you think 290 people would trust you with one of the most important decisions they’ll ever make? They are trusting you with everything they hope happens in their financial life, hoping you’ll protect them from all the things they hope never happen. Why do you think 290 people who made that decision with you told nobody about you last year?” And when I ask that question, they stare at me and they just think, “God, I have no idea.” I feel like…
Michael: Yeah, that’s a really good way to frame it. Slightly depressing, frankly. But like, “You work with all these clients. Great. You got a couple of referrals. But let’s just take a moment, on the several hundred you work with who didn’t tell anybody about you last year, why not?”
Dan: Yeah, you’re not curious about that a little bit? What’s going on?
Michael: Well, I’ve got to get through my depressive funk first, but once I get through that…because truly, that kind of hurts a little. I mean, it is what it is, and it raises, as you have this interesting question, like, “So what is going on with the other 290 clients who apparently didn’t tell anybody about me last year?”
Dan: Seventeen years ago, that’s what I wanted to figure out. Again, back then I thought, “Well, if the greatest value I could provide to these advisors is helping them tackle that problem, I’m going to go tackle that problem.” So I went out and bought every book I could find in the finance industry about how to earn referrals. And they were all what we talked about earlier, “I get paid in two ways” and greatest…they were all these high-pressure…
Michael: And just saying the context here, we’re talking now like, this is early 2000s?
Dan: Yeah, yeah.
Michael: So timeline-wise, so we’re just barely getting going on RIAs and fee-based accounts. We are still mostly coming out of like an independent broker-dealer mutual fund sales world is probably where most of our businesses were. You were selling mutual funds or variable universal life insurance at this point.
Dan: Completely, completely. And when I was reading those books, what’s interesting is I didn’t read those books through the lens of a financial advisor, I read them through a consumer’s eyes because I was not an advisor. I was new to the industry. So I was viewing all these one-liners that the books were teaching these people to say in the scripts on the receiving end of those scripts. And I thought, “My God, if the people important to me, my lawyer, my advisor ever said these things to me, it would be insulting to my relationship.” So I really couldn’t figure it out back then. So I thought, “Okay, well, I’ll go back to my background in clinical and behavioral psychology and I’ll try to study the behavior of referring. Why do people do it? Why do they not do it? How do you engage them in a way that they want to do it?”
So 17 years ago, I got a group of advisors together and said, “Hey, look, I want to try to tackle this problem, but there’s only one group of people who can truly teach me how to do that, and that’s your clients. I want to get inside their heads to learn why they do, why they don’t.” So I began to conduct focus groups, which I did a lot of in the mental health field, with advisors’ top clients. And Michael, I defined top clients this way. I said, “I want your clients to meet two criteria. Number one, when you look at their name, you would absolutely hate to lose them as a client. And number two, you would absolutely love to clone them as a client.” That’s it. I don’t care about AUM, because we all know you have rich clients that you would never want an entire client base full of people like that, okay? You’d hate to lose them, love to clone them.
And I began to conduct these focus groups with top clients to learn their perspective of referring. And what I learned from them was just…it was fascinating because I got to kind of look behind the curtain of this topic, and now we’ve talked to thousands of clients over the years, and it’s amazing how simple it actually is from the client’s perspective and how hard we’ve made it because of all that old baggage from the transactional sales world.
Michael: Okay. So what are we missing that it’s so simple and straightforward from the client’s perspective yet almost none of us are rolling in referrals or anything?
Dan: Yeah. So there was a study done. I’m bringing up this study because it kind of frames my conversation with the clients over the years. But one of the firms in the finance industry, Dimensional Funds, DFA, every year they put out a benchmarking study, what they call an Investor Survey. DFA has been one of my bigger corporate clients over the years. And so in 2017, just short of 20,000 financial advisors’ clients completed this survey. And Michael, it’s not just, click, click, click and you’re done, it’s a considerable investment in time for these clients to complete this survey.
And we had helped author a couple of questions that were around referrability. And one of the questions was, “Do you value what your advisor does for you enough that you would confidently take the risk and recommend them to somebody who is incredibly important to you?” Now, we wrote that for several reasons, because everybody defines value differently and everybody defines the risk that is tied to “confidently referring,” they define that differently. And what was really interesting, 97% of the respondents said that they did value what their advisor did enough that they would refer. But what was more interesting is 51% said that they had actively made a referral to their financial advisor in the last 12 months. And it was…I’m going off top of my head, but I know I’m going to be close, 24% said they had referred 1 client, 14% said 2 referrals, 7% said 3 in just 12 months, and 3% said 4, and 3% said 5. So when you add up all those metrics, it would suggest that for every 100 clients an advisor has, they should receive 96 referrals in a 12-month period of time, which is obviously ridiculous. No advisor could…they’d have a staffing issue, not a business development issue.
So you look at this study and you think, “Okay, well, why…” It’s completely anonymous, right? Why would 20,000 people in a totally anonymous survey lie about that topic? And what we’ve learned, Michael, over the years is that the average advisor does not have a shortage of clients who are willing to refer. When I interview them and talk to them and say, “Hey, do you value what your advisor does enough that if you had that chance you’d take that risk and you’d recommend them to somebody very confidently?” the vast majority of clients say yes. So it’s not a shortage of people who are willing. When we dig deeper into our interviews and our conversations with clients, we find that they have a shortage of clients who are capable of executing successfully on a referral.
And I’ll get deeper into that when you want to talk about that, about what that means. Because, for instance, 81% of the people interviewed through or in the survey for Dimensional Funds, and I’ve found very consistent data over the 17 years we’ve done this, 81% that said they had referred, the method that they use was to passively give out their advisor’s contact information. So every advisor that will listen to this, I will guarantee you in the last 12 months has had at least one client, probably several, tell them, “Hey, I gave your name out to someone the other day, they’re going to call you.”
Michael: Oh, yeah, absolutely.
Michael: That’s the ringing a bell. Yep.
Dan: Yeah. Yeah. And when advisors…when I have a room of them and I say, “Raise your hand if you’ve heard that,” and they all raise their hand.
Dan: You could see the frustration on their face. And I say, “Be honest. How do you respond to a client?” And when they’re being honest, they say, “Thank you.” And I say, “But what do you know for sure? For sure, you know that phone call is never going to come in.” Now, rarely, very rarely. So what you have, that’s just one example of a client that’s willing to refer and even trying to refer. These are clients that are identifying somebody they care about that needs help, trying to ensure they get help, but using a totally ineffective method that will never lead to the outcome of getting help. And a lot of times they even tell the advisor, “Hey, I gave your name out.” The advisors know those people aren’t going to end up getting help, but they simply respond with, “Hey, thank you. I appreciate that.” And as a result, none of those people have the help they deserve from these advisors. And so there’s much better ways to handle just even that situation that could lead to a lot more referrals.
The Root Of The “Referral Gap” [24:28]
Michael: And so does that really become the crux of it? This, I guess essentially referral gap. I think by your numbers, literally the majority, 51% said they referred their advisor in the past 12 months, then most of us look around and like…I mean, I think a few, literally low single-digit percentage growth from referrals is typical for most firms. Fifty-one percent of my clients said they referred me, 3% of my growth last year came from organic referrals. I think that was literally the number from the latest “InvestmentNews” benchmarking study. Like, existing client referrals was 3% of growth for the average firm. So we had this ginormous, roughly 48% referral gap. And is that essentially what it comes down to? That ironically, we’re basically using different definitions of the word “referral,” right? To me, referral is I got to talk to a person that I can do business with. And my client’s version of a referral is, “I gave your name to someone.”
Dan: Completely. Now, again, though, if you think about, and I’ve talked to enough clients to know their motivation, “Why did you do that? Why did you give them…what was the outcome that you hoped for when you gave the advisor’s name and number to your brother-in-law?” Their answer is always the same. The answer is never, “Well, I did it because my advisor gets paid in two ways.” It’s never about, “Well, the greatest compliment I could give my advisor is a referral to my friend. So I wanted to compliment my advisor.” Every client I interview, when I say, “Why do you take the risk? Why do you do that?” “Well, because my brother-in-law needed help.” So you think about that one little isolated thing but how big that is that you’ve got this client who values their experience enough that they would take the risk and say, “Look, I work with Michael, you should work with Michael.” That’s a big risk to take, right? You’ve got these people out trying to do it. They’re just using the wrong method. And as a result, tons of people that deserve help don’t get help.
So that’s one. We find really, Michael, there are five areas that clients are very poorly educated or uneducated that lead to that client being willing to refer but not capable of actually doing it. So until advisors have the conversation with clients in all five of those areas, they can never truly…like you talked about earlier, they create this experience, and, “Let’s really serve our clients well, and then let’s hope that leads to referrals.” Well, that will lead to somebody being willing to do it. But if you don’t have the right conversations with clients and give them the right information, they’re not capable of following through with it. That is only one example of those five things is they don’t know how important it is to facilitate an introduction should anybody ever need help that they care about. And it’s because we don’t talk to them about that. We don’t have that conversation with clients. And a lot of it is because we have this sales training voice talking in the back of our head that we’re terrified to talk about it.
Michael: I think you make an interesting point as well of the risk stakes that this actually entails for the client, for the person that’s referring. If I hear my brother-in-law is having some issues or having some financial challenges, as you said, I don’t refer my brother-in-law because it’s the greatest compliment I could give to my financial advisor, right? Or I felt he was undercompensated by the original transaction so I need to pay him the second way, right?
Dan: Yeah, you pay him twice.
Michael: I do this because I want to help my brother-in-law. But if I don’t want Thanksgiving to be awkward, I do need to actually make sure my brother-in-law gets a good result, right? There is a rather significant sort of onus weight pressure on the client who refers, that part of what’s going through their head is like, “I really hope my advisor doesn’t screw this up because that’s going to make my family gatherings awkward for the next few years.” It’s not only a question for the client of just, “Am I going to refer?” it’s actually a rather high-stake situation for most clients to face that moment and decision and decide they want to risk their personal relationship with someone who’s often a friend, family member, or a colleague just because they think the risk of the relationship is worth it for the help they believe you can give as an advisor.
Dan’s Five Factors For An Effective Referral Relationship With Clients [28:55]
Dan: I completely agree with you, Michael. And that is…I mentioned that we find there are really five things that have to be in place to really have an effective referral relationship with any given client. And this kind of probably will create some good structure for our conversation is the first one I tell advisors seems very simple, but it’s actually very complex. So the first thing that has to exist between me and a client to have a successful referable relationship is that that client has to perceive so much value, they have got to experience so much value with me that they would confidently take that risk and recommend me to somebody who is incredibly important to them.
Now, I tell advisors, “That sounds obvious.” “Well, of course, Dan.” But those two words in there, “value” and “risk.” And you’re in a very interesting industry. Because if I line up 10 clients of a financial advisor and say, “Hey, how do you define a valuable experience with an advisor? What has to happen for you to say, ‘Man, that was really valuable?'” I will get 10 completely different answers, right? Now, a realtor is different, right? Sell my house full price, 24 hours, non-contingent, done. Good realtor. Very easy to define the outcome. But finance industry is very different. So the value has got to exceed the risk. And again, the second word, “risk,” if I line up 10 clients, they all define risk incredibly differently.
So the number one thing I tell advisors is around this idea of number one, having clients that value the experience that you’ve given them so much they would take the risk and refer is that you have got to have a process for generating consistent and honest feedback from your most valuable clients to kind of assess, “Where do they fall there?” And I’m not talking like, “Hey, anything else we should be doing?” I mean blocking time every 12 or 18 months, sitting down face-to-face, being prepared with questions to learn that client’s perspective of value. Where are you delivering value? Where are you exceeding expectations? More importantly, “What things can we focus on to make your experience better than it is today? How can we communicate differently? How do we make review meetings more enjoyable and effective for you?”
I don’t think I’ve ever met a firm in all the years of doing this that has a process to sit down, push all the financial data off the table and just sit with that client and say, “You are so important to us. We have got to ensure that we’re delivering to you as a client what we promised you as a prospective client, and you as a client have to feel comfortable talking to us about your experience. So I want to learn, what does value mean to you? I want to learn, when you think about trying to get somebody else or help, what risks do you perceive there?” So number one, we talk about, they’ve got to value the experience enough that they take the risk. But you have got to have a process to assess, “Are we, in fact, delivering that?” And I don’t mean SurveyMonkey, “Click here, scale of 1 to 10,” I mean eyeball to eyeball, letting those clients know how incredibly important they are, and hearing it from their perspective.
Michael: So is that effectively like, is this where the role of client advisory boards come in? Is that how you would frame this?
Dan: I differentiate the two. So to me, this is one-on-one or husband, wife, whatever the mix is. This is, “What is important to you? How are we delivering for you? How do I improve you?” In an advisory board, it’s hard to dig deep into those things with eight different people. What I love about advisory boards is they’re…well, they should be incredibly smart people with a broad array of experience and expertise. And those are the people that I bring strategy issues to. “Here’s something I’m struggling with. Here’s something we’re thinking about. What do you guys think about this?” I think advisory boards are used for their brainpower, their creativity, their problem-solving skills. One-to-one to me is about you, and how do I do a better job for you?
Michael: And is the idea of this that I should be having these periodic one-to-one conversations, “What can I be doing better for you,” with literally every client? Am I supposed to be earmarking, every 12 to 18 months one of my client meetings is doing this feedback session for some or all of the client meeting?
Dan: Yeah. So I recommend…I call them interactive client surveys. I recommend that advisors isolate. So imagine, Michael, I’m looking at my calendar for December, and I’m going to see nine clients for a review meeting. And I’m going to ask myself, of those nine, which ones would I absolutely hate to lose but love to clone? Because I don’t have time. Most advisors couldn’t…they don’t have the bandwidth to do it with every single client. And I find that when they isolate that, when they say, “What I hate to lose and love to clone this client,” it’s kind of the 80/20 rule. It’s about 25% of the people they serve today that if they could have 100 clients just like that, they’d never retire because they love working with those people so much. So I would isolate those people and weave that feedback into that review meeting, but again, in a structured way. That’s kind of what we teach is how do you structure it? What questions do you ask? And I find advisors all the time, I tell them and then they experience that the client actually enjoys that part more than the review part.
Michael: Right. We all are getting asked our opinion about things. It’s usually pretty easy for most to open up, particularly if it’s something they’re that deeply engaged in. Like, “Oh, you handle my life savings and you want my feedback, yeah, I can probably come up with a couple of things here.”
Dan: And it’s funny because advisors are always so terrified of losing their clients and all that. They forget how much their clients respect them. They have to to trust you with something that big. And for you to reach out and say, “Hey, look, you’re coming in for your review in December, I wanted to see if you’d be open to us structuring it just a little bit differently. And here’s why. You’re an incredibly important client. We would hate to lose you as a client. We have never blocked the appropriate time to push all the financial stuff away and just talk about your experience. To learn about the things that we’re doing well, specifically things that maybe we could focus on to make it better. Would you consider blocking 20, 25 minutes during our meeting, and I’ll come prepared with some good questions and just kind of teach us about your experience? It’s going to be good for you because it’ll help us really deliver what you’re looking for, and it will be good for us because your opinion will help all of our clients.” That feels good to be on the receiving end of that phone call. And that’s what advisors forget.
Michael: And so what happens when I’m in the moment of this? Do you have like a standard scripted thing that you literally teach? Like, “Here are the eight questions you should ask in sequence?” Is this just more of a very open style like, “Hey, just tell us about what we’re doing well and where we can improve” and let the clients go wherever they will and then you can figure out what to do with that later?
Dan: No, that can go off the rails pretty quickly. And most advisors aren’t comfortable with just freelancing. So there’s really structured… Now, every firm is a little different. They might want to add a question or two about, “We’re doing these client appreciation events, how could we improve those, make those more enjoyable, increase attendance? Here’s some ideas we have. Which one do you think people would like them?” Every firm is a little different, but there are cornerstone questions. For instance, the first one I recommend any advisor know the answer to is, “When you think about your original decision to work with our firm, there were a lot of options you had, why did you decide to trust us with something this important?” Now, there’s a lot of things that happen when you ask your client that question. Number one, it makes them reflect back on that decision. A lot of times they came to you because they were referred to you by somebody who’s important to them, right? So a lot of times they bring up referral on their own, that, “John and Judy said we should come see you.”
But what’s interesting is, when they talk about, “Here’s why we decided to use you,” those are all the same words that they use out in the public when they are talking to other people about you. So understanding from their perspective what is valuable about you, what you do, those words are critical. And I always tell advisors, “Look, you can pay branding firms all you want to come up with a differentiating value proposition about, ‘Here’s who…,’ none of that matters if your clients are not out there articulating that same thing.” The true value proposition of any firm in the country is what those clients say about you when they’re out there. And so the only way to know what that is is to ask. So that’s one thing I recommend people ask. Every advisor should know the answer to that question.
How Dan Helps Advisors Break Down Their Referral Logjam [37:59]
Michael: And what else comes up as common questions I should be asking as I’m going through this kind of feedback process?
Dan: Yeah, another one I always recommend they ask on the tail end of that response is, “Now that you’ve been a client for a while, what would you say is the most valuable thing that we provide to your family?” Because there are often different responses why they decided to become a client. And now that they’ve been one, what do they find valuable? And again, that response is typically going to teach an advisor if they’re referable, what their client would say to somebody when they’re trying to get that person to come see that advisor.
I tell advisors that they should understand, “If you were to articulate or explain to somebody why our business model, our philosophy, the way we do business, why it’s different from other advisors, how would you explain that?” And I tell them that because every firm that I work with, before we start, I say, “Okay, give me your value proposition.” And it’s, “We’re an independent, objective, fiduciary, fee-only, blah, blah, blah.” It’s all this stuff. And when I ask the clients that question, they never use the same words, right? So to me, it’s, I want to understand, does that client understand if I’m a fiduciary fee-only, okay? So that’s one segment of the market. Those firms feel that’s a huge differentiator for them, right? That they’re fiduciary and they’re fee-only. Does that client understand those differentiators?
I can’t tell you, Michael, how often when I ask a client, “Is this firm, are they fiduciaries?” they don’t even know the answer to the question. They don’t. And when they say, “You know what? I think so. I’ve heard that word. I believe they are.” And I’ll ask the client, “Why should you care? Why should that be so important to you?” They can’t answer the question. You think about, it’s a foundation of a firm’s value proposition and their own clients don’t even understand why it’s important. So I believe they need to know the answer to that question. Most advisors want to know, “How do we make our review meetings more meaningful?” And a lot of times they learn that they’re getting way overly technical in the review meetings, and they need to dumb it down a little bit. Because the client is not going to say, “I don’t know what the hell you’re talking about.” They’re going to nod. And nobody wants to raise their hand and say, “I don’t understand anything you just said.” Yeah, those kinds of things
And I always ask about, “What are a couple of actionable things that we could do to improve your experience? On a scale of 1 to 10, if you’re at a 7, what are 8, 9, and 10? What are those things I can focus on this year to give you a better experience?” Just those kind of things. But the thing I tell advisors, you’ve got to truly want the answers to the question. You’ve got to be vulnerable and truly want to enhance that client experience. Otherwise, they can see right through that stuff.
Michael: Right. So if I’m going through this process, ultimately, I guess the point of all of this is, if you want to get referrals, if you want your clients to take the referral risk, as you put it, don’t forget the underlying premise, which is, you have to actually be good at what you do and valuable enough that they’re willing to do it, right? That’s essentially kind of the essence of this part. And to be fair, not trying to be overly harsh, but for some of us, yeah, we actually don’t stand up so well on this part. Like, we do the thing we do. It may not feel great to clients. It was good enough that they were willing to pay for us or stay with us, but that might just be because it’s kind of a pain in the butt to change advisors. And they just really might not actually be that happy or that valuing of what you do. So that’s still why you’ve got to start here?
Dan: Completely. And look, all of us, no matter what we do, are insecure. “Am I delivering enough? Are they happy? Am I in front of them enough?” But if I wonder…if I think, “Okay, only 3% of my clients are referring, what’s going on with those 97%? What could I do differently?” I can hire all the coaches in the world that I want to, and the reality is none of them can teach me what to go do, but the clients can. I always say they are the greatest coaches on the planet that are absolutely free, at your disposal if you just ask. They’ll teach you anything you want to know, as long as you truly want to learn. And I find a lot of advisors just want to put their head under the covers and pretend. And people that have a lot of success with our stuff are the ones that…it’s not about getting referrals, to your point, it’s about becoming and maintaining…having this referrability about you before…so that’s why, number one, without that, nothing else matters. They’ve got to see so much value they would take that risk and refer. But we’ve got to identify, do those clients that we’d hate to lose and love to clone currently feel that way? And no coach on the planet can teach you that. Only the clients can.
Michael: Because all of us are different. We end out with our own different value propositions. We end out with somewhat different clients who value us for different things. That’s also the point of like, “Hey, we can do the hypotheticals about what the value of a financial advisor is.” And no shortage of industry studies right now that are putting ideas out about that. But if you really want to know, you’ve got to ask the people that pay you.
Dan: Yeah, completely, Michael. I’ll give you an example. When I knew I was going to be on your podcast, you and I met, I think a month ago, finally, in person. I’ve known of you and I enjoy your content a ton, but now that I knew I was going to be on your podcast, I’ve asked some of my colleagues that I know about you. Are they familiar with you? And by the way, kudos to you, I do not think I’ve met anybody in the finance industry that was unfamiliar with who you are. So you’re obviously doing a great job there.
Michael: Well, I’m just thankful. You asked your friends and we’re having this conversation. So apparently, that went okay.
Dan: Yeah. So you don’t need to edit that part out. But what was interesting is I asked… My background being clinical psychology, you’re trained to ask questions all the time. But I asked several, “What is it about him that makes you enjoy his content? Why do you go…” And the diversity of the answers was incredible. Some people said it’s because you don’t sugarcoat things, you say it like it is and blah, blah, blah. Some people said you’re highly technical and highly intelligent. Everybody derive value from you completely differently. And clients are no different. And if we’re not asking them, they won’t teach us.
Michael: So step one is this dynamic of addressing the value question. Like, do you really provide value? If so, do you actually even understand what your value is to your clients? Which may or may not be what you thought it was. And does the value-risk quotient add up well? Does the value sufficiently trump the referral risk that they would actually be willing to take this risk? And have you built a structured feedback process to make sure you’re figuring that stuff out? It sounds like that’s kind of…that’s core area number one for “How do I make the referrals begin to open up?”
Dan: Completely. And by the way, just one little caveat or I guess addition to that, this isn’t just clients, this is centers of influence, CPAs, attorneys. We constantly hear, “God, we have this CPA over here. We give him a bunch of referrals, he doesn’t give anything back. What’s his problem?” Well, when I go interview the CPA, it breaks down in the first category. They perceive the risk of confidently telling one of their clients who pays them for advice, they perceive the risk of saying, “Go talk to Michael. He’s incredible. You’ll have a great…” The risk is greater than the perceived value. It breaks down right at the beginning.
So again, I tell these advisors, “Hey, if you really want to have effective relationships with CPAs and attorneys, go out and find out from their perspective, what does value mean to them? ‘If we delivered something that made you say, ‘I’m proud to put my clients…’ what is that? And when you think about the risk of confidently recommending an advisor, what is it in your eyes? What have your past experiences been? Where people dropped the ball?'” These people will teach you anything you want to know to learn from them so you can be more valuable to them. But it’s across the board: client, CPA, attorney, doesn’t matter. Number one is crucial.
Michael: Okay. So then what’s number two? What comes next for breaking the referral logjam?
Dan: Yeah. So the second thing that we learned from interviewing all these clients, to put it most simply, the average client doesn’t have a clue what their advisor does for a living. So when I ask the client, I ask them two different things. Number one, “Why is your advisor different from all the other advisors within 10 miles of here? If you had to explain to me at a very high-level, whether it’s their business model, their philosophy, what makes them unique? Sell me on their differentiators.” The average client cannot even start to explain. They are so poorly educated. If I ask the advisor that question, boom, 30-second elevator speech, “Here’s why we’re all…” They nail it. None of that matters if their clients can’t nail it.
So number one, they don’t even understand. Number two, and this is hilarious, Michael, and every advisor that I work with that calls himself comprehensive wealth management or financial planner, it’s funny because I’ll ask the advisor to write me a comprehensive list of all the services that they are capable of helping people with. So I’ll explain, if me and my wife and our children were prospects for your firm, it’s not just me that can come to your firm, it’s my immediate family members that I’ve influenced. We’re all very different. So I’ll talk about my immediate family members and say, “Write me a list of everything that we could call you for.” And I leave them alone and they write a list, and it’s investment management, it’s 401(k)s for all your business, it’s insurance and college planning, blah, blah, blah. On average, they can write about 10 different services. When I take that same question down to the client level and say, “Hey, write me a list of all the services this firm provides,” let me ask you, Michael, how many services do you think the average client can list?
Michael: Oh, God, I’m going to say it’s horribly low. Like, whatever three things they happened to use themselves.
Dan: Yeah, it’s between two and three every single time. So you think about, so you’ve got a client that number one, I got their feedback, they’re having an incredible experience. They definitely would refer me. Awesome. Nope. They can’t even explain why somebody should use us and why we’re different, and they don’t even understand 70% to 80% of the things we’re capable of.
So if I perceive you as my money guy, that’s my money manager, because that’s what you do for me. And now I’m out talking to my brother-in-law, who says, “Hey, man, we’re restructuring our buy-sell agreement. We’re trying to buy $20 million of insurance and our old insurance guy is dead. Do you know anybody who’s good at helping with that kind of stuff?” Huge missed opportunity. Now, I’m not saying every advisor wants to be perceived as an insurance person, but if that’s something that you provide, your clients should be educated about that, whether they use you for that or not. Because otherwise…I call it cross-education. The industry talks about cross-sell multiple products. The problem is cross-selling. It’s, clients aren’t cross-educated. So their paradigm, their understanding of what you do is incredibly narrow.
Going back to my days in the mental health field, when we sold our company, I think we had 70 locations. So we had clinics for kids with traumatic brain injury, schizophrenia, bipolar disorder. And if your kid had schizophrenia and was in my clinics for kids with schizophrenia and every time we met we talked about their progress, your paradigm of what I do is schizophrenia. I could give you the greatest experience on the planet, but when you’re at that fundraiser talking to somebody who has a kid with traumatic brain injury and they say, “I can’t find a company to save my life that’s any good at helping kids,” I have a missed opportunity there. I don’t have a cross-educated client. Meanwhile, I have six clinics for kids with traumatic brain injury. Because I cross-educated, I allowed those people to cross-refer. Huge missed opportunity for a holistic financial advisor.
How Advisors Can Cross-Educate Clients In A Non-Awkward Way [50:13]
Michael: So I certainly get the phenomenon. Clients, I guess, really narrow us in a box for sort of two reasons. They only know the services that we did for them, and they only think about those services as solutions for people like them. You helped me with the life insurance for my buy-sell agreement for my company. So A, you only do life insurance solutions, and B, you only help business owners with buy-sells. Like I can have a family member who needs a giant pile of insurance for a special needs child, I still don’t think of you because you’re only my life insurance person for buy-sell agreements for business owners, right? We get shoehorned both by whatever solution we did and client situation. You only manage portfolios for retirees who are transitioning out of large firms that have to do a pension lump sum decision because you worked with me when I retired from my company and did the lump sum for my pension. So I get it, we get boxed in.
So what are we supposed to do about this exactly? Because, as you said, if you give us a chance to make a list as advisors, it’s going to have like 27 items on it, but I’m fairly certain my clients will get annoyed fairly quickly if every meeting I’m like, “By the way, just to wrap up this meeting, I’d like to read off this quick list of the 27 things I do in case this piques your memory anytime you’re talking with the next person you might refer to me.” Am I actually supposed to do this cross-referral in a way that doesn’t make it awkward?
Dan: Excellent question. So hopefully, action item number one that hopefully for advisors listening is actionable is idea feedback, and take some of those questions and execute. Idea number two is, “How do I cross-educate effectively?” And I believe every 12 to 18 months, at the end of that review meeting…so at the beginning of the review meeting, I’m getting feedback, I’m asking the right questions to hear about their experience. Then I’m moving into my typical review meeting. There to talk about what we’re there to talk about. And at the end, the last three to five minutes, I simply send them away with a one-page document. And I’m astounded how few firms have a one-page document that simply lists, “Here are all the different things that we help people with.”
So Michael, if you were my client, I would simply say to you before you leave, “Hey, before you leave, I want to send you away with this, and I want to explain why. This is a list of all the different things that our firm does. Many of these things you are never going to need.” Okay? And that’s an important statement what I just said, because it kind of diffuses any kind of words…”It’s a comprehensive list of all the things we do, many of which you will never need. I have even highlighted the things that you use us for.” Now, why do I do that? It really shines a spotlight on all the things they don’t even know we do.
So I say, “I want you to walk away with this for two reasons. Number one, I never want you to have a problem, a need, a concern, an issue that doesn’t get addressed because you don’t even know that we do these things. That’s just bad service. Okay? Number two, I don’t want somebody you care about to have a need in these areas and not get their need addressed because you don’t know that we’re here for them. So all I want to do is send you away with this. Look through it. If there’s any topic that you think, ‘Hey, we’ve never covered that but now I want to talk about that,’ we’re here for you.'” That’s it. That is it. I can’t tell you…
Michael: Yeah, that sounds super comfortable. “So, Dan, what else do you do, man?”
Dan: Go, “Hey, for $19.95, you can buy that.” No. The thing I tell advisors is…they always want script or…it’s like, “Dude, you can’t script honesty. You don’t have to. Do you think your clients understand everything you do?” “No.” “Do you think that they should because you don’t want them to ever have a need that they don’t get help with because they…” “Well, yeah.” Then say that to them. That’s it. Say it to them. They shouldn’t have to not get help or go across the street to your competitor and meet them only because…
You brought up the example. It’s hilarious, Michael because it’s exactly…I have this advisor named Josh outside of Portland, and you go to his website and they do comprehensive wealth management, seven-step discovery process, blah, blah, blah. One of his clients I interviewed bought a $10 million term insurance policy to fund a buy-sell agreement for his company. I asked Josh, or I asked the client, I said, “Hey, if you had to explain to somebody what does Josh do, how would you explain it?” And he said, “He’s a life insurance agent.” I said, “Cool. So if you had to define who Josh works with, who would that be?” And he said, “Well, he knew more than most of my attorneys about the buy-sell process. So I would say business owners who are restructuring their buy-sell agreement.” Think about how narrow that. It doesn’t matter how much this dude loves Josh, he’s an insurance agent that only works with business owners who are in the process of restructuring a buy-sell. It’s just a horrible…
Michael: And then the irony to me, like, you could actually also just go all-in on that then change the wording on your website and the rest and go “network with attorneys and accountants who help people restructure buy-sell agreements” and show up for that. If you want to be known for that, be known for that.
Dan: Develop your niche.
Michael: But right now, you imagine how this plays out. Like, and Josh has 50 other clients who’ve interacted with him with 50 other ways or 49 other ways, and now you have 50 clients selling 50 different stories.
Dan: Completely. And I always tell audiences…I do workshops, like you, and keynote conventions, but when I do a long workshop, three, four hours, I’ll tell the audience, “A lot of you looked at the agenda and thought, ‘Oh, my God, three to four hours, I get to listen to one human being talk. That’s longer than the movie ‘Titanic.’ Good God, this is going to suck.'” Right? But I know at the end, a lot of them found value they didn’t expect, because they see the word “referral” and they thought, “Oh, some cheesy sales guy is going to get up and talk.” And by the way, I’m sure some people do feel that way.
But I always say, “Number one, you could have experienced so much value in this experience that you would confidently go out and tell other people to get our experience.” Right? The Feedback Marketing Group. But I tell them, “Secondly, do you understand everything the Feedback Marketing Group does to help advisors? And the answer is no. Your understanding of what we do is the experience you just had, a workshop isolated to this company. I could have 19 coaching platforms and products, I don’t, but I could, and you would not know that because you’re not well-educated. And so your willingness to refer was immediately derailed by a lack of information.” So it’s universal for any industry that provides a multitude of things. So step two, Michael is, establish that process to go out and cross-educate. And it literally takes five minutes, and it requires a one-page document.
Michael: And the one-page document, I’m assuming we don’t have to get overly fancy here. Just put your firm’s logo at the top and just say, “We do these things and we help these people,” and have a couple of columns of bullet points. Is that basically what we’re down to?
Dan: John Bowen over at CEG, they’ve got a great piece that is so simple, but, like I tell advisors, a good wealth manager does about five things. Number one, they make sure you’re tax-efficient. Meaning for every dollar you earn, you get to keep as much of that dollar as possible. Now, they might align with the CPA firm to make sure you do that, but now that you’ve kept that dollar, they need to have a strategy to help you grow the dollar. Number three, they help you protect the dollar. Number four, they help you take back the dollar someday when you need them. And number five, if you die with the dollar, it should go where you want to in the most favorable way possible. Now, within each of those five categories are 401(k) plans and investment strategies and life insurance, disability. So what I like about Bowen’s piece is it’s simple, it breaks it into five categories and lists what service fall in those categories.
And, real quick, one objection I hear from a lot of the firms is, “Well, we’re a comprehensive financial planning firm. We don’t want to oversimplify what we do into a list of services.” And I have to remind them that the average consumer does not wake up in the morning and look at their wife and say, “Honey, we really need to go find comprehensive wealth management today.” They need one of the things on that damn list. It evolves into comprehensive wealth management conversations. But most people come to you to solve a problem. So sometimes there’s a little bit of arrogance around, “Oh, I don’t want to simplify it as a list because we’re much bigger than that.”
Michael: Well, and frankly, we eat our own cooking. We get our own results from that. Like, what happens when we don’t get specific about what we do? Everybody thinks we do something different. They only think the narrow thing that they came in for, and then you get a 3% referral growth rate.
Dan: Yeah, it’s funny, I always like…well, I don’t like, but when I read the surveys after I speak and I get feedback, one of the most common criticism that I get is, “This stuff was simple. Way too simple, way too elementary.” And I always think, I have interviewed client bases for 17 years, I’ve never met a client that has all five of the characteristics that are necessary to refer. And I guarantee you, every one of those firms that says that, it’s like, “Yes, it is simple, but your clients are in the exact position I just described. So you’ve still got to solve the problem.”
Michael: You can tell me it’s simple, but you’re the one that’s not doing it well and has a 3% client referral rate. So let’s talk more.
Dan: Exactly. Exactly. Yeah.
Michael: So number one is make sure that clients see enough value that they’re willing to take the referral risk. Number two is cross-educate them on the various stuff that you do, the full width of who you serve and what you actually do for them so that they don’t go overly narrow on you. So then what’s number three?
Dan: Number three is also simple. All of them are simple but kind of complex when you think through them. Number three is really, they have to understand two things. Number one, and this is going to sound like the stupidest thing anybody’s ever heard, that the clients have got to understand that you want to help more people. Michael, half the clients that I interviewed, when I say, “Hey, is Michael currently focused on bringing on new clients? Meaning on January 1st when he woke up, was one of his main objectives this year to bring on additional clients?” Half the people don’t know the answer to that. They say things like, “God, I don’t know. Boy, he’s really busy. I can’t even get the guy on the phone.” They have this perception that their advisor runs 100 miles an hour and is at capacity, and so they’re completely indifferent as to whether that advisor even wants to help additional people. So we’ve got to…it sounds so simple, but we’ve got to clarify that. That, “Hey, we do have capacity. If you have people that you care about that need help, you need to know we have the capacity to help those people.”
How Dan Says Advisors Should Be Actually Be Describing Their Ideal Clients [1:01:12]
But secondly, the second piece that falls under that third category is the client has got to understand who those people would be. And here, Michael is the question that I asked the client. “If you and I walked into a crowded room full of people and we got to know everything about the people in that room, what they do for a living, their family situation, what’s going on in their life, the kind of things that you know about your best friends, right? We could get to know everybody in that room. We could extract only the people that would be the perfect new client for Michael. The kind of people that Michael would say, ‘That’s my ideal client,’ and the kind of people that would say, ‘Thank God I met Michael.’ Describe for me in that crowded room, who are we looking for?” And all that, in 17 years, I’ve had 2 or 3 clients that can answer that question, that truly understand the characteristics of a good client. A lot of advisors can’t define it for me.
Michael: Well, people who have at least $1 million and like to delegate it to me. That’s my ideal client.
Dan: Well, and that’s the other thing is when I tell my client, “Look, minimum investible assets of $2 million,” and I work with a lot of firms that have minimums, and they say, “$2 million minimum of investible assets,” well, that’s fantastic, you have put an enormous bottleneck now on that client. Because I don’t know about you, Michael, but I don’t know the investible assets of my best friends. I have an idea whether they’re wealthy or not, and they have nice things and they make a great living, I don’t know the investible assets. So if I’m not confident, I just don’t take action and refer. Even if I think they could meet my advisor, I just don’t do it. And too many advisors define it by assets, not characteristics, professions, things that I know about the people I care about. And so it limits your client’s ability to refer.
So number one, they’ve got to know you want to help people, and number two, they’ve got to have a good feel for who are those people. Because clients a lot of times tell me, “I don’t know anybody who needs my advisor’s help.” And that’s when I say, “Well, let’s define who that would be in the first place.” And I ask them that question, and they say, “Well, I’m not really sure about that.” And I say, “So it’s not fair to say you don’t know anybody who needs help. You could be interacting daily with somebody who would benefit from meeting Michael. And it’s not even…you don’t have awareness about that.” And they say, “Yeah, that’s probably true.”
Michael: So how should I be defining these things, right? Because I think, again, as advisors, we do immediately come back to one of two things. Either A, I do have some minimums, or at least ideally, I would like to get clients who are more affluent and can pay me more in fees. Like, there is some wealth level that I’m shooting for. And I am comprehensive, so I don’t want to shoebox myself. I feel like that’s where most of us, we get stuck pretty quickly on this. So how are we supposed to be defining who those ideal people would be so that my client can identify them?
Dan: Yeah. And that’s a difficult one to answer in a box because everyone is very different. You’ve got everywhere on the spectrum from, “I’ll talk to anybody who will talk to me,” all the way down to, “I only work with physicians in the surgeon market that make $1 million or more.” Very narrow.
Michael: Yeah, I get it, if I’ve got a niche or a specialization already, this gets pretty easy because I’ve got a niche and I can go get known in my niche. I suppose, indirectly, that’s part of why niches work really well. Because if I specialize in recent divorcees who are going through a difficult divorce, that’s crystal clear. You know who those people are. You know who they are in your lives. I’m going to come to mind immediately as the person who helps recent divorcees going through a difficult divorce. Like, those kinds of specializations become very easily referable because they’re defined in scope.
I feel like most of the challenge for, I’ll call it even I think the typical advisor, is we try to be broad-based and comprehensive. And so if you ask me who I can help, it’s like, “Well, I can help pretty much anyone. I’ve got my CFP marks and a comprehensive financial planner.” And so then we really get stuck on this, like, the only way who defines someone who’s perfect is, “Well, I can help anyone because I’m comprehensive, but I would like to help people who have comprehensive needs and can pay me a lot.” So the minimums go up but the service is a broad.
Dan: Yeah. To me, there’s really two characteristics that help me at least identify somebody who might need my advisor’s help, right? So the first is a description of what are the characteristics of the kind of people that we like to work with? Meaning what kind of people are they? So the example I give is, a friend of mine went through a divorce, and he’s finally saying, “I want to get back out there a little bit and maybe start seeing people.” So one of my first questions is, “So what are you looking for? What kind of person?” And he went on to describe the personality type, what’s important to them, their ethics, their values, and that, in my mind, it immediately eliminates people in my mind. Yeah, they don’t fit into that. That values, that ethics, the personality type, all that kind of stuff. So at a very high level… A lot of advisors say, “I like to work with people like you.” Well, the average client doesn’t know what that means. If my advisor said, “Dan, I want to be referred mainly to people like you,” does that…
Michael: So like, people like me who are 5 foot 11? There are some other people who are 5 foot 11.
Dan: Is that men? Is that business owners? Is it my assets? Is it married? Is it father? I don’t know what that means. So to me, it’s like, start with, what are the kind of values and personality characteristics of the people that you really enjoy spending time with no differently than if you were trying to describe an ideal relationship or a person to date or marry? It’s very simple.
Number two is I like to identify…when you look at your list of services, you’ve got investment management, long-term care, 401(k)s. I like to kind of turn those services into life events. So, people who may be going through any of these situations, their career has really taken off and they’re finally to the spot where they need to think about not just paying the bills, but the future of their assets. Somebody who owns a business and might need some help with, “How do we take and build out a 401(k) platform for them that works?” Somebody who’s just recently married and now has children and has to think about protecting those children. So there’s all kind of life events that are tied to the services. So I think just a simple, “Hey, here’s what they normally look and act like, and here are the kind of things that are going on in their life.”
Michael: And then the second piece to this, or I guess sort of the first since we’ve had them in reverse order is just making the point that you actually want to help more people in the first place, which I do admit resonates with me. I’ve had this conversation with more than one advisor over the years as well, where they tried to start opening up referral discussions, and one of the first things that came up was basically the client saying, “Oh, I didn’t actually realize you were taking on more clients right now.”
Dan: Yeah. Yeah, it’s interesting. This morning, I, for the first time in my life a couple of months ago, hired my own coach to work with me. His name is David DeCelle. If you haven’t heard of him, he’s a great guy. But he coaches advisors. And I asked him to coach me on the same kind of things that he works with them on, which is really staying in front of people in a meaningful way and putting good content out there. And he posted this morning something that said, “Why are people so scared to ask for referrals?” I’m paraphrasing, but it was a long thing and that was one of the things. And my response on his social media was, because most people, it never occurs to them that they actually help people. If you think about how simple that is, for an advisor, when they think about a referral, if they view themselves truly as being of service to people… In the mental health field, I truly believed we were great at what we did. And if your son had schizophrenia or bipolar disorder and they came to my firm, I believed they would have the best experience, the greatest treatment, the best quality of life possible. I believed that about us.
So to me, talking about, “Hey, if you know other families that need help, you need to know that we’re here to help.” That was never a, “Oh, God, what an awkward conversation.” No, my God, our job was to be helpful to people. That was the mission. That was the reason to own the company. But again, I never got sales training. I never got in the mental health world to say, “Hey, client, I get paid in two ways. Do you know the names of five other people with mental health issues?” We didn’t get that kind of stuff. So I didn’t have the baggage.
So I tell advisors, most of the time it’s just honesty, but if you truly believe you come from a place of service, of being helpful, it is super easy to say, “It’s important for you to understand, client, there may come a time that you identify somebody who needs help. That may never happen, but it might happen. And it’s important for you to understand we are here for those people. We have capacity. We will definitely give that second opinion,” which CEG likes to say, it’s a very simple statement, but it clarifies that, “Oh God, I thought you were too busy and this and that.”
Michael: Interesting. And it reminds me as well that, like, this is one of the indirect issues of making sure you’re, I guess going back to number one, your client service and your client interactions are good. What happens if you have trouble getting back to clients in a timely manner, aside from just, they may or may not be frustrated with slow service response? Like, if you can’t reply to them in a timely manner, they’re certainly not going to want to refer you because they think you’re so overbooked that you can’t reply to them in a timely manner.
Dan: Yeah, it’s funny, as my CPA, he owns a large tax planning firm. And he started the thing and it kind of grew into a nice firm. And he sent a newsletter, and, of course, I never read my accountant’s newsletters. They put me to sleep. But one of them, in the subject line, it said, “We are busting at the seams.” And I thought, “What could that mean?” So I read this thing. Well, what it was, was an announcement that they are building this big, beautiful new building. And the first line said, “Because of the overwhelming amount of new clients that you have sent us, we were literally busting.” It just created this vision of chaos.
So I called my buddy who owns the firm and I said, “Hey, I just want to clarify because I’ve sent a lot of business owners your way, you’re at capacity, you’re not taking on new clients.” He said, “Well, of course, I am.” I said, “Okay, well, you just told all of your clients you’re not.” And it never even occurred to that. He thought it was a compliment or, “Hey.” And you’ve got to be careful the message you’re putting out to clients when they say, “How’s business?” Advisors like saying, “Oh, my God, it’s crazy, crazy busy.” No. “Business is solid. We’re doing great. We always have capacity to help more people.” I always told my clients that, “We want to continue to grow because that is how you bring the best resources to your clients, but if we ever grow in a way that you feel it in your experience, we have failed. But right now, we have capacity.” And I told them, “We’re looking to bring on 10 to 12 new clients this year.” I would just have a completely honest discussion, but it came from a place of being helpful.
Michael: And I think there’s another good point that you make in this as well. I know a subset of advisors out there, it’s still uncomfortable to talk about this and kind of, “Here’s what I do and the service that I do.” And, as you said, if you really deep down believe you’re in a service business and you’re helping people, why wouldn’t you want to tell everyone? Don’t do it in an obnoxious way, but why wouldn’t you be proud to tell everybody about the awesome helping stuff that you do? And if it gives you pause, what it suggests to me and what I’ve seen in some advisors is, at the end of the day, they couldn’t talk confidently and proudly about what they do because they’re not actually confident and proud of what they do.
Dan: Which is a whole different issue, right?
Michael: They’re at a firm that they don’t really like or they’re in an environment that they’re not proud of. And they’re struggling with it and they’re ashamed to tell people because they really are actually deep down not feeling good about where they are. And you don’t solve that by figuring out how to get better at asking for referrals, you solve that by getting to a firm where you are actually proud to tell people what you do and where you work and not feel ashamed about it.
Dan: Yeah. They don’t need Feedback Marketing Group, they need to go find a life coach to figure out what they want to do. You’re right, that’s a…and that’s the thing at the root of it. It’s like, if you don’t feel passionate and referable in the first place and that you deliver value, none of this stuff matters. You’re never going to be successful in having these conversations.
Michael: Yeah. So we’ve kind of got three of ours now. Do you deliver on value enough to take the referral risk? Number two, that that’s, I guess, essentially like, did you cross-educate your clients on what you do? Then number three is, have you cross-educated your clients on who you serve? And do I have that conversation at the same time I have the cross-educate on what I do?
Dan: Yep. Yep. Absolutely. If you think about it, it flows perfectly into that conversation. And it’s really…it’s a one-minute statement. It’s not this big risky thing to say.
Michael: So then what’s number four?
The Most Important Piece Of the Referral Relationship [1:14:38]
Dan: Yeah, number four, I would say, Michael, of this conversation, if the advisors who listen to this take one thing away and execute, it’s what we’re about to talk about. It’s the number one thing I continually hear advisors say, “I spent time with that language, I started to use it, and it has completely changed the way I interface with clients when they refer.” So the number four thing is that once a client values what you do enough that they would refer, they have an understanding of all the different things you do, they know you want to help more people and what those people would look like, the fourth thing they have to do and understand is the importance of an introduction when they come across the people that they care about that need that help. We have got to take that 81% metric of people that give your name and number out, and we’ve got to drive that metric down.
So I’ll tell you exactly what I mean by that. So there’s two different ways to address this topic. Proactively, meaning having the conversation with a client before they’ve given our name and number out, and reactively, when a client says, “Hey, I gave your name to someone the other day, they’re going to call.” Right? So let’s focus on the second one first. So when advisors hear a client say, “Hey, I gave your name to someone the other day, they’re going to call,” they almost all of them say, “Hey, I appreciate that.” And they know absolutely that person’s probably not going to call.
So I educate them that I’ve said the same thing. It happened to me all the time in the mental health field. It happens to me in the insurance company that I bought. It happens to me in coaching. People will say, “Hey, Dan, I gave your name to someone the other day. They’re going to call.” I’ve said the same thing in every industry, in every circumstance. I say, “I appreciate it very much. Can we talk about it for a minute?” And they always say, “Well, yeah, sure.” And I say, “I’m assuming that you did that because somebody that you care about, somebody you know, you think they might need some guidance or help. Is that accurate?” And what do you think 100 out of 100 people say?
Michael: “Well, absolutely. Yeah, I thought you’d be able to help them. That’s why I told them about you.”
Dan: Yep, 100 out of 100 people say, “Oh, yeah, yeah.” And then they normally even elaborate. “Yeah, yeah, we were at dinner the other night. They said this, I said that.” Right. And I simply say, “Here’s the problem. They don’t know and trust us in the same way that you do. Okay? As a result, reaching out to us for some of those people can be difficult. As a result, a lot of people don’t do it. And finally, as a result, most people don’t get help. So if that was your intent, to be helpful to them, can you and I simply talk through a more actionable method of introduction that will be comfortable for you, but more importantly going to be comfortable for them but will increase the likelihood that they actually get the help they deserve?”
Now, that could be coffee. It could be lunch. You could be there. You could not be there. It could be an email that we’re all CC’d on something very comfortable to execute. And Michael, I cannot tell you how often I gave your name out. Turns into a simple conversation, an action plan that the client decided on and the introduction occurs. And if an advisor can simply master and be prepared for that. I can’t tell you how many 70-year-old guys in the audience come up and say, “God, I wish I had that language 35 years ago.” Because you think about how many times over the decades it’s going to happen.
Michael: Oh, yeah. Well, even I’m flashing back to my early sales training days. To the extent we did stuff like this, it was still, well, either we didn’t do the first three steps, so it wasn’t set up well, or it was forced. Like, “I’ve taken the luxury of printing letters that you can use to introduce me to your friends. Just sign your name at the bottom and stamp and address them and I’ll send them out for you.” I know an advisor who literally did that back in the ’90s.
Dan: People still do that. People still do that, Mike. They literally are still doing that. And it’s like you’re forcing the method that this sales trainer told you to do on somebody who…I swear to God, if my advisor did that to me, I would be like, “Dude, are you kidding? That is so cheesy.” So again, everybody is so unique and different. And to have any one method of talking about this is silly. It ignores the individuality and behavior and psychology of every person that you work with.
Michael: But the essence of it is, I’m cueing up someone who said, “Hey, Dan, I referred you to my brother-in-law” so that you get this opening to say like, “Hey, can we talk about that more for a moment? You referred your brother-in-law. I haven’t heard from yet. No offense, just I know it’s sometimes awkward contacting an advisor from scratch. So if you really want to help them, can we talk about a different way to introduce them that would be comfortable for them and comfortable for you?” I’m taking this mention and just trying to amplify it and extend to say, “Hey, you wanted to help them. Can we talk about just a good way to do this that’s comfortable so that they actually get the help they need that you thought was a good idea in the first place?”
Dan: You said it perfectly because none of it had to do with me. And I’ll never get to meet them and I…it’s not about me. It’s about did you do that to be helpful to somebody? Because if you did, let’s focus on a method that will actually lead to that outcome. And advisors have got to…I tell them, “I’ve interviewed thousands of these people over the years, trust me, their motivation for giving the name out was to be helpful to another human being, period.” So make sure that you do that.
Michael: So this raises, I guess, a few follow-up questions for you. One, I think you’ve said it but like, you can pick whatever thing turns out to be useful as an introduction process. Just literally, let it be whatever the client thinks is helpful. Or I guess you can make some suggestions if you want. “Hey, we can do coffee or we can do lunch or we can send an email, whatever it is.” So I guess I’m wondering, A, how do I cue up to get to this conversation? Do I now need to be checking in from clients periodically to say like, “Hey, just wondering if you referred me lately” so that I can then cue up, be like, “Oh, well, I didn’t hear about it,” or, “I didn’t hear from them, so let me tell you about an introduction?” I get it if that passively my client says, “Hey, I referred you recently,” I’m like, “Oh, thank you so much. Let’s talk about that for a moment.” But not every client cues up that conversation for me.
Dan: Correct. So to me, the proactive method is, again…so we’ve talked about, get feedback, cross-educate, let them know that you want to help people. And the final piece is proactively, before that client walks out, have the conversation. But again, if you do it in the way I recommend, there will never be awkwardness. So before you left, I said, “Michael, one thing that is also important now that I’ve made sure you know we want to help people, there may come a time that you come across one of those people and you feel like they need help. That may never happen, but it might happen. And if it does, I want to talk about how important it is to ensure that you and I strategize a way to make an introduction happen. And here’s why.”
And it just goes into the same language of, “You know a lot of times our clients give our name and number to somebody they care about. They don’t know us in the same way that the client does. And as a result, those people never get the help they need. So that’s why it’s so important. And everybody is different that you know. So if it ever happens, first step, call me. Don’t give name and number, call me. We’ll talk about why you feel like they might need help. Figure out that best way to make it happen.” That’s it. That’s it. Just a simple, plant that seed, make sure they understand it. “It’s not about me, it’s about you. People you care about. It may never happen to you. So it’s okay if it never happens.” But just proactively talking about it
Michael: Interesting. And it’s just literally setting up here in the truest sense like, “Here’s how you refer to me.”
Dan: Correct. Yeah. And always focused on the outcome of somebody getting the help they deserve. I’ll give you a real quick example, Michael, that’s near and dear to me. My personal advisor was talking to me about…I think he had read my book or attended a workshop I did. And when I was talking about this, afterwards he said, “It reminded me, my clients say, ‘I gave your name out all the time,’ and I always say thanks because I’m terrified of being pushy or salesy.” And he had one client say, “Hey, I gave your name to this guy.” And I’ll leave his name out of the story. “I gave your name to this guy at work. He makes a ton of money. He’s got five kids, but he spends all his money. So I keep telling him he needs to come see you to put a plan together because he’s going to have a bunch of weddings and college, blah, blah, blah.” So he said, “So I gave him your name, going to call.” My advisor said, “Thank you, appreciate that.” And I asked my advisor, “Did you know you’d never hear from that person?” And he said, “Yes, I did.”
Well, it turned out the person was a guy who lived two houses from us. He had five kids, made a lot of money, like I said. Unfortunately, the guy was driving home for Christmas with his two daughters in the car, semi crossed over the yellow line and hit him and killed both him and both his daughters. Now, the guy made a half a million dollars a year, did, in fact, spend all the money on vacations and lake houses and left his wife and three remaining kids financially completely devastated. He had no life insurance. He had very limited assets. His wife had never earned income for the family because she was raising the five kids. And you think about here was a client identifying, this guy needs help. They even told that advisor, “This guy needs help.” And because that advisor couldn’t get out of their own way, I guarantee it, if that guy would have met my advisor, he would have died with a minimum of $5 million of term insurance in place, period. And to watch what happened after that event and this emotional devastation, they have compounded financial devastation. It’s awful.
So I always just tell a room of advisors, “Guys, sometimes you’ve got to get out of your own way and just say the truth. ‘Thanks for giving the name out.”‘ But God, those people aren’t going to have help. They’re going to be driving around tomorrow on icy roads in Nebraska, where we live, completely exposed to a bunch of things that would devastate their family. And that’s not okay with me. Let’s make sure they get help. And I don’t know why that’s so hard, Michael, for advisors to…they come to my workshops and they hear it and they’re like, “Yeah, that’s right!” but they don’t spend the right time to just get comfortable with the language, make it their own, and go have the conversation.
The Proverbial Elephant In The Referral Room [1:25:08]
Michael: So then what’s the fifth item? What’s the last in this category? I’ve demonstrated my value relative to risk. I cross-educated on what I do. I cross-educated on who I serve. I’ve tried to train them on how to actually give me an introduction so we can make this connection and hopefully I can help this person. What’s the last piece that we’re missing?
Dan: Yeah. So the last one is the elephant in the room. And that is, when it comes to referring, I always tell advisors there are two very unique kinds of people. And I call those people goldmines and landmines. And goldmines are clients that are great clients. They’re valuable, they’re profitable, but they have a very important psychological makeup in that they are confident in referring you to other people. They don’t see it as risky. They don’t see it as private. “It’s nobody’s business who I work with.” They are goldmines. They can duplicate themselves over and over. But you also have landmines. And these were about 20% to 25% of clients, and those are people that it does not matter what you do for them. You could get them a 30% return in a down market, they will never tell another human being about you. It is not a behavior they exhibit. They see it as risky and private. And they have all kinds of excuses, right?
So the fifth thing that I tell advisors they need to understand, they have to be able to identify, “Who are my goldmines and who are my landmines” unequivocally. Because if I don’t know the answer, I will walk passively around everybody to avoid stepping on a landmine, but I will never be able to fully embrace my goldmine. So here’s how I do that, Michael. And again, this is a script. We had a wealth management firm that has $8 billion under management. And I went out to coach them. Because again, they were experiencing metrics, like you said, like 4% referral metric, which for a firm like that that’s gotten to that point, it should be higher than that. All they did, they ignored my whole process, the feedback, everything, they just got comfortable with this one conversation and their referrals were up the first year they implemented 151% over the year before, just by identifying who is a goldmine and who is a landmine.
So what I do with a client is I simply say, “I wanted to get your feedback on something. Our firm primarily grows by helping our clients and helping people that are important to our clients, people that our clients care about.” Now, that brings up a topic that is very uncomfortable for a lot of people, myself included, referring. Okay? On one hand, every time I saw you, Michael, I could say, “Hey, who do you know? Do you know anybody that needs help?” And you’ll find I do not do that. It’s uncomfortable for me and I’m sure it would be for you. However, I’ve also learned in the past that if I do not even bring up the topic to my clients ever, I genuinely have clients that know people that need help and are not crystal clear that we have capacity to help. That we are here for them, we will give them second opinion. So I simply like to understand for my clients, “How do we talk about that with you, if at all, periodically in a way that will be comfortable for you?” And then I just shut up. I don’t say a thing after that.
Now, first of all, it’s important the language. Nothing I said had to do with “help me,” any of that stuff. It’s about being helpful to others and some of our clients. It’s about acknowledging referral is the elephant in the room. It’s an awkward topic. Never want to create awkwardness, but I also don’t want clients interacting with people that deserve help that aren’t even clear that we want to help people, right? So how do I bring it up if at all I gave them the chicken door to say, “Well, for me…” in a way that’s going to be comfortable? And then I listen. And here’s what’s going to happen, Michael. And I’ve done it forever now, the advisors get comfortable with the language. Seven out of 10 or more are going to look at that advisor and say, “We’ve just got to bring it up, man. Help me understand, what kind of people are you guys looking to help?” It will be a completely comfortable conversation. They will normally bring up one of those other four things we’ve already talked about. “Help me understand, who do you want to…I gave your name to a guy not too long ago. That guy ever called?” One of those things come up.
Your worst-case scenario is a client looks at you and says, “You know what, Dan, for me, this kind of relationship is pretty private and not something I really talk about, so nothing against you. It’s just not something I do.” And I’m going to say to that client, “David, that’s the reason that I asked that question. You are really important to us, and I would never want to bring up a topic that is uncomfortable, but like I said, I also don’t want clients in the dark if we want it. For us, that topic will never come up.” Period. Go into your CRM, mark him as a landmine, and the elephant is out of the room forever. My review meetings, I don’t have to put it at the bottom of my agenda. I don’t have to do any of the garbage, right? It’s about, identify landmines and respect them. You didn’t make them that way. It’s who they are. They also don’t recommend movies and restaurants. It’s not a behavior they exhibit. I made a living going from 1 employee to 500 employees in the mental health world by identifying landmines and really embracing goldmines. That’s it.
So the five things. And think about it, Michael, if any of these five are missing, it derails their ability to be a really great advocate and referral source. Number one, make sure they value the experience enough that they would even take that risk. Only way to do that, get honest feedback. Number two, make sure they’re well educated about what differentiates your firm, and make sure they have a comprehensive understanding of all the things you do. Number three, let them know that you want to help people. If they care about people that need help, you’re open to helping those people, and what kind of people enjoy your help the best. Number four, ensure if they ever meet those people, they understand the importance of communicating and getting an introduction strategy together so that the person ends up getting the help. And number five, identify which clients you should even be having these conversations with in the first place. And then when the 70% say, “Just talk to me about it,” do it. Get comfortable. Start talking about it. And forget the 30%. You still want the other four characteristics in place. You still want them to have a valuable experience, understand the things you do, but when it comes to referring, don’t worry about it.
Michael: I love the framework, including the last one, that just the dynamic of identifying the goldmines and the landmines. Obviously, when you find the goldmines, ask them more and work with them more. When you find the landmines, don’t. But the secondary effect that you’d pointed out, which is, yeah, I think for a lot of us, we’re afraid to have the referral conversation because, as your analogy aptly illustrates, we don’t want to step on a landmine. But rather than not talking to any clients because we’re afraid of the 1 or 2 or 3 out of 10 who might turn out to be landmines, essentially, find a tactful way to ask them if they’re a landmine, if they are, you’re done. And if they’re not, now you actually know that the way is clear, you’ve scanned for mines.
Dan: Yeah, completely. And the key is, you’ve got to just believe the language you’re saying. I jokingly give the analogy, it’s like I said, in college, I was terrified to go up and ask the girl out, it’s a slight change to say, “Hypothetically, if I were to bring up that to you and ask you out, what would be a comfortable way to do that?” And the girl could say, “If I were you, I probably would not do that.” Perfect. I appreciate, right? I didn’t get rejected. I can walk away unscathed. I didn’t have the awkward moment. But 7 out of 10 times, she’s going to look at me and say, “Dude, ask.”‘ “Oh, cool.” It’s eliminating that elephant in the room. And forever, you’ll never have to look at your 500 clients and wonder why 470 didn’t do anything last year.
What Dan Does And How He Helps Advisors [1:33:18]
Michael: So talk to us overall about just what you do now that we’ve done this journey of the five steps of actually getting your referrals and earning them. Can you just give us a little bit more context of like, what is the actual business of Dan Allison at this point?
Dan: Yeah. You mean number two out of the five things, what do I actually do for a living, right?
Michael: What do you actually do for a living?
Dan: Yeah. So I have two components to what I do, two different companies that I own. One is Feedback Marketing Group, which we’re talking about here today. And primarily what I do at this point for that firm is keynote conventions and conferences and do private workshops, where I come out to the firm, I spend a day onsite. A workshop format where I do research before I get out there and do some phone work with them after I’ve been there to really dive deeply into, okay, philosophically, this all makes sense, but execution-wise, how do we go do it? So I do a lot of that stuff. I do some phone coaching, individual one-on-one advisors. But, as you know, when you’re on the road as much as you and I both are, it’s very difficult to keep this schedule for one to one coaching.
Michael: Yeah, we’ve overlapped at a few conferences over the years, both being road warriors. It’s tough doing coaching calls from the road. I understand.
Dan: I have always told my wife, “If you ever leave me, I’ve got three free years in a hotel, so I will not have to worry about where I’m going.” Yeah. So we really try to keep it there. Because I acquired another firm about a year and a half ago, two years ago, that I spend a lot of my time building now that’s in Des Moines, Iowa called Brokers Clearing House, BCH. And it’s an insurance operation that really partners with RIAs. Let me explain why I bought it. And I won’t delve too deeply into it. But as I consulted all these RIAs and fiduciaries, the one area I thought a lot of them were not as strong at as they should be is risk management planning. So life insurance planning, long-term care planning, these areas that they kind of perceived as sales commission, yet they serve so many clients that need that product in their planning. Not everybody, but a lot of them.
Meanwhile, I would also go to these insurance conventions and speak and consult, and I was like, “My God, there is a lot of bias and unethical behavior.” Commission really does drive horrible behavior. And so I thought, what if somebody could own an insurance company that partnered with RIAs but behaved in the way that they did? Fiduciary, independent, completely objective, does not care which carrier, which company, which product, but truly let the RIA drive the plan and identify the gap. And then we are just backend solution for identifying best solution to fill that plan. So I bought this company. It’s 45-year-old company, kind of traditional firm when I bought it. And the goal was that, to make it a resource for RIAs to work with where they know there’s not going to be that inherent bias when they need insurance solutions.
So my endgame there, Michael, of which is a dream that I have, is I want to be responsible, or at least largely part of creating a recognized fiduciary standard in the life insurance industry. Meaning if you do not follow this… Kind of think about when the CFP was created, right? It created a standard. I want to bring that kind of a standard to the life insurance industry. Because I’ve had, unfortunately, at a relatively young age, I’m 44, a lot of people very close to me pass away. And I’ve seen the end results of those people not having the planning in place and the kind of things that it did. And they all had financial advisors. So that’s my passion. And so we have firms that come directly to us, or they say, “Look, I don’t want to do the insurance myself,” in which case we have vetted firms that will partner with them to come in and actually be kind of that retail face of that. So it’s been awesome. We’re up I think 350% since we bought it, showing that there’s a huge market for what we’re doing. So I spend half my time there and kind of half my time on the road.
Michael: Well, I’m fascinated by that as someone with your background, like, built a business in the mental health field, had a liquidity event, sold it and decided to buy an insurance broker general agent. You don’t see a lot of that in our industry. It’s an unusual path unto itself to come in and…but I get it. That’s how you get to come in and say, “Yeah, I don’t come to this with industry history. I just come to this saying, ‘Here’s how I want to be served as a consumer.’ Y’all are really messed up. We’re going to make a thing to fix this. So I’m going to put my dollars on the table and buy a company and we’re going to make this happen.”
Dan: When I was at an investment conference giving a speech, somebody from the…during the Q&A said, “I looked at your LinkedIn profile and it says you own an insurance company. Why, with this consulting firm in the investment world that’s on this trajectory, would you go and do that?” And he mentioned, he said, “It’s a really biased and unethical industry.” And I said, “Well, that’s why I bought into that. And I want to become the change you want to see in the world type of deal.” But I said, “When you look at the demographic in the insurance world, the average age is 59 to 60, right? And the average young person coming into the industry, 87% fail trying to become successful in the insurance world.” What a great demographic to be 44 years old. I’m right in the middle. So that was a great acquisition that my partner and I, Debbie made, and it’s been great.
What Surprised Dan Most About Building A Business [1:38:58]
Michael: So having gone through this cycle a few times just from the business owner end, you were involved in building and scaling up the company when you were young. You did what I guess was kind of the, I’ll call the solopreneur approach for a while. Like, went on your own, built this Feedback Marketing Group thing where it’s you doing coaching, consulting such, now you’re back on the business side building and scaling a business with Brokers Clearing House. So what surprised you the most about what it takes to build a business?
Dan: Oh, man. What has surprised me a lot about…well, focus on the financial advisory world. There’s no shortage of talent when I’m out there looking at who are the next people to serve all these clients that are going to need the advisor’s help. I think everybody is trying to find this mysterious like secret track to run on that will guarantee success in the industry. And I think there’s a shortage of people that understand that it’s a marathon, right? It’s not a sprint, that old adage. If you just put your head down… I always tell young advisors who are struggling in that first three to four years, I always tell them, “Sell your shoes if you have to, to continue in this industry.” Because I’ve never seen an industry that is harder to become successful in but so incredible to be successful in. Like when you get to see, if you’re a good wealth manager, the end result of your work is absolutely incredible, you can make an incredible amount of money, that if you structure your business correctly, you can have a great liquidity event, or it can run itself.
But it’s really, everybody in search. At the conferences, I see speakers that sell this in a box. And if you only buy this, your business is going to explode. You’re not in a “triple your business in 90 days” industry. It’s all about relationships. It’s all about staying focused. And most advisors, I tell them, “Guys, if you can look at this client base that you’ve built and honestly say you’ve not executed on the things that we have talked about, don’t focus on anything but that. You’ve already got all the hard work done. You’ve got clients that trusted you enough to give you all their money. Engage them better and your growth will be more than…” Again, you’ll have a staffing issue, not a business development issue. I found that to be very hard in the wealth management industry is people just trying to find what’s the secret? And there’s not one. Hard work is the secret.
Michael: Yeah, I love that framing and just the whole phenomenon, it’s a marathon, not a sprint. It fascinates me, when you look at all the industry research, even just down to things like average advisor income, the number one determinant of advisor income is years that they have been an advisor. Just sheer time. There’s some other stuff of like, what did you build and what did you scale or did you want to scale it? But the number one overwhelming driver is just how many years you’ve been running the marathon, because relationships compound and reputation compounds and brand compounds and expertise compounds. Everything about what we do in the business has these fantastic compounding effects that it gets to be a really doggone good business after 20 or 30 years, but it’s often still hard at the 10-year mark, and it’s usually just brutal in the first 3. First three years pretty much sucks for everyone.
Dan: Yeah, Michael. And that you’ve just got to be honest, right? That’s the way it is. That’s what coaching…there’s too many advisors that are out for looking for a coach who are going to help them sprint, not realizing that they need to hire a marathon coach. They’re trying to get there as fast as possible, and it’s like, no, you need to have somebody to put all the right foundations in place, and then you just have to understand, you’ve got to outwork everybody. I always tell people there’s no traffic at the extra mile. When you’re willing to outwork everybody, you’ll get there. Don’t chase all the sexy things. Don’t believe in the coaches that say you can double your business. It’s hard, but once you get those clients, my God, the hard part is over. Engage them in a way that they want to talk about you and the rest will take care of itself.
Michael: Well, and I love that framing of just, if you’re having some trouble with this, don’t hire a sprinting coach, hire a marathon coach.
Dan: Yep. Yeah, somebody that gets that it’s not going to happen fast. And by the way, nothing should that is sustainable. Nothing should happen quickly. And that goes to clients. I told my staff this morning, “We have a really big prospect for our firm.” And one of my staff said, “Well, I’m really disheartened because I’ve met with the guy four or five times and he’s just not ready to make a move.” And my point to him was, “Look, everybody is happily married until they’re divorced.” You have got to be patient with relationships that are worth being patient for. And that’s where I find advisors who are really well networked and understand that sometimes you don’t have to have a motive in mind to connect with people. Sometimes it’s just about being connected. Those are the ones that have a lot of success. Deliver value without expectation of money.
Michael: So what was the low point for you?
Dan: Oh, man. I’ve got a lot of them. I think the lowest point was when I sold my first company. I was 27 years old and had a huge liquidity event. And in fact, my attorney called me the day the money transferred, and unfortunately, I was on a guys trip to Las Vegas, which I wish he would have waited a couple of days to tell me the money was wired.
Michael: Don’t tell a 20-something on a guys trip to Vegas. “Hey, we just deposited a giant wad of money in your account.”
Dan: Completely. And when I got back, obviously, you don’t expect that to happen, and it was awesome and all this. But after about a month, you think, “Okay, I signed a five-year non-compete clause in the only industry all my formal education is in, all my life experience is in, all my passion is in, what the hell am I going to do?” And that was a rough couple of years to really kind of explore, where does that fit?
And I honestly, back then I bought the finance company simply because I knew the two owners from college. And they were pretty talented people. And I felt, “Well, finance, God, that’s got to be easy. Everybody needs money and everybody needs advice.” In the mental health field, very few people need that. But all of a sudden I found my groove of, where does mental health and behavior fit into your industry? And the answer is everywhere. I am shocked that there is not more behavioral psychology, not just behavioral finance, but just behavioral psychology in your industry. Because in psychology, we call money is a secondary conditional reinforcer. And all that means is the money, it’s paper. It doesn’t mean anything. It’s the emotional attachment to that money that is what’s important. I don’t think there’s enough training in this industry. But my low point was those few years that I thought, “I’ve got to wait out five years,” and God, that was lightning in a bottle.
I can’t tell you how many times I sat there thinking, “My best days are behind me at 29 years old?” And when you learn, Michael, that the money…you think you’re chasing things, and if I just had the car and the house and the money. That’s what happened. And then you get it and you’re like, “Holy crap, that’s not what I’ve been chasing.” And so I feel like right now I’m at such a good spot because I love what I do. I love what we’re talking about here. I’m passionate about it. I’ve met so many awesome people all over the world who do this for a living. And I love the insurance thing because of…I’m on a mission there. I feel like there’s a big change going to happen in that industry. And I’m excited to be part of it. But there was a gap there that was tough.
What’s Next For Dan And What Success Means To Him [1:46:41]
Michael: And so what else comes next for you? Is it really just this kind of balancing act now or two hats of Feedback Marketing Group and doing keynotes and private workshops for firms and then trying to build Brokers Clearing House with this fiduciary insurance for RIAs approach?
Dan: Yeah. For now, that is…I’m laser-focused on this. Look, you and I were talking before we started about we’ve never known what it’s like to not have multiple irons in the fire and 1 million things going on. And actually, I had four different companies and I just sold off finally two of them. And those are the only two left. And I’m going to stay laser-focused on that for two reasons. Number one, I finally love every day what I do. Nothing is a…even the problems are fun to solve, versus other things that were just annoying to solve. But also, I’ve got two sons, a 16-year-old and a 12-year-old. And I look back, my mental health company that I sold back then now is seven times the size as when I sold it. So I probably sold way too early. But I look at, they’re coming to that age where maybe they’ll want to work with dad someday. Maybe they’ll have the talent, the ambition. And I’m always jealous when I get to go consult wealth management firms and a father and son are working together well. And for me, I kind of want…that’s the dream. And if they’re not talented enough, I guess I’ll ride off into the sunset myself and keep building the insurance thing and probably be 78 years old in the nursing home wondering why I never was able to bring a fiduciary standard to the insurance industry.
Michael: Well, it’s a noble windmill to tilt that.
Dan: Yeah, good. That’s a nice way of saying, “Good luck with that.”
Michael: If it wasn’t hard, it wouldn’t be a good opportunity.
Dan: I completely agree with you. I completely agree. And that’s what I’m most excited about, especially because, like I said…you and I talked about retirement and that idea, I don’t even understand. I’m not capable of. So hopefully, I’ve got another 30 years in me. That’s a long time, long runway.
Michael: So as we wrap up, this is a podcast about success, and one of the themes that always comes up is just even the word “success” means different things to different people, often different things to us as we go through the stages of life and business. So you built what anyone would objectively call a successful business. Went through, had it big, had a liquidity event, have kind of made this a second career run and now this is compounding for you. But I’m wondering, how do you define success for yourself at this point?
Dan: Oh, God, that’s funny. I’ve been interviewed 1 million times, nobody has ever asked me that question. I don’t know, man. Right now I look back, you and I talked about this when we met, I look back at the year, 5 years ago, I flew 250-plus flights in 1 year and realized that I got caught up in the very thing that when I sold my first company, I thought, “Thank God, I’ll never have to do anything that I don’t want to do for money again.” Wow, at a young age, I don’t have to solve that riddle. And I found myself falling right back into it at the cost of missing things that are very important to my children, and being on the road and watching through FaceTime my son’s basketball game or music program. And I feel like I’ve pulled that back a ton. I’ll maybe do 40 events a year, which for me is very low. I feel like if you pulled all the events away from me and I didn’t travel, my wife would probably be unhappy with that. I think she enjoys…
Michael: Yes. I’m familiar with that problem. I need to travel a little bit less, but only so much less.
Dan: Yeah, completely. And so for me, the way I define success right now is balance. That when I’m at work, I’m fully engaged in something that I really love to do, that I’m passionate about, that I believe I’m at the base of the mountain. I don’t like being at the top of the mountain. I find the most…the challenging stuff is what excites me, which is why I like the insurance industry being so biased and all the bad things about it is what excites me. But I also love that when I’m home, I am fully engaged with my family, fully present with my kids and my wife, and that I don’t have that…the texts going off Saturday at 4. Because in the mental health field, man, I had hundreds of staff, it was 24/7, 60, 70 locations, whatever it ended up being. And it was non-stop. Text at 3 in the morning on a Sunday. And I knew more stress by the age of 27 than any industry could ever give me at this point. So the one word is “balance,” trying to find balance. I’ve never been good at it.
Michael: Well, amen. I had my own struggles with it as well, as I think a lot of us do in this business in particular. Because just we…it’s a helping profession. It’s a lot harder to find the balance and slow down when you actually want to help people and the things you do help people, and then it feels good when you help them.
Dan: Yeah, that is the tough part. When you’re a people pleaser, you try to be of service non-stop. And that’s not easy to do.
Michael: Well, thank you, Dan, for joining us on the “Financial Advisor Success” podcast and sharing the journey and the search for balance.
Dan: You are welcome. Thanks for asking me. And keep up all the good work. It’s exciting to watch what you’re doing.
Michael: I appreciate that. Thank you. And enjoyed the chance to finally connect. Having seen you talk about some of these on sessions for a while, it was very cool to have you share the whole experience with us here.
Dan: Awesome, man.
Michael: Thank you. You, too.
Dan: Have a great rest of your week.