Executive Summary
It seems that the common wisdom in the financial planning world to improve client referrals is either "ask more often for referrals" or "do a better job when you ask for referrals." However, it may be that the single greatest reason why most planners don't get very many referrals is simply because... well, they're not actually that referrable.
Getting Referrals As A Financial Advisor
At last week's Schwab Impact 2010 meeting there was an interesting session by Julia Littlechild of Advisor Impact (now Absolute Engagement). The presentation included a few notable highlights, as reported in the blog of Mike Byrnes at Financial Planning magazine, such as:
"93% of clients are somewhat or extremely likely to continue working with their advisor. 91% of clients are comfortable providing a referral. 77% of clients gave their advisors an average satisfaction rating of 8 out of 10 or higher. And how many of these clients actually provided a referral? 29%."
"Why do clients provide a referral? 57% report it was because their friend had a financial challenge. 48% report that it was because the friend asked for a recommendation. 2% report it was because the advisor asked for a name."
The point that Littlechild makes in her presentation is that the primary distinguishing characteristic in her research between those who received a referral and those who didn't was how "engaged" clients are with the planner (in fact, under Littlechild's definition of "engaged" clients, 100% of such clients provided at least 1 referral per year!). And certainly, I won't deny that having engaged clients has a significant impact. But I was struck more by one statistic in particular from the research: 57% of clients report that they referred a friend because he/she had a financial challenge, and that was actually a more frequent reason than just because the friend asked for a referral. In other words, the leading cause of referrals is that a client sees a friend in trouble, and proactively reaches out to the friend and says "You should work with my financial planner."
Yet if this is the leading reason why clients refer, then it implies that the best way to generate more referrals is not to ask them more, or be more sensitive/direct/effective/whatever in how you ask for the referral. It's to BE more referrable, so it's easier for clients to refer you!
Becoming A More Referrable Financial Advisor
What does it mean to be more referrable? Here are some examples of the difference between a "referrable" and a "typical" financial planner:
Referrable: "You know Betty, my planner specializes in working with women who are going through a divorce, and I know you're having a tough time with the divorce with Tom right now. You should give my planner a call."
Not referrable: "You should call my planner Betty, he's great."
Referrable: "Did you see the article that my planner had in the newspaper this week? She does great work; you should call her."
Not referrable: "You should call my planner, she's great."
Referrable: "Did you see my planner at the Chamber of Commerce event last night? He's really doing a lot of work these to support our community. You should give him a call."
Not referrable: "You should call my planner, he's great."
Referrable: "You should see all the designations and degrees my planner has. She studies all the time and really knows her stuff. She gets quoted in the paper all the time because she's such an expert."
Not referrable: "You should call my planner, she's great."
Most planners rely on some version of the "not referrable" (or at least, not very referrable) quotes above. They do "great" work for their clients, their clients tell their friends "my planner is great" with little further information and nothing else to distinguish them, and the end result - as Littlechild's research shows - is that most clients are happy, satisfied, and generate no useful referrals.
The referrable planners, on the other hand, may be delivering all of the same services and benefits to their clients. Yet the fact that they do things that make them more referrable - have a specalized niche, work with the media, volunteer in the local community, get advanced education, etc. - generates more useful referrals of new business. The key is not that some article in the local newspaper lands you some new clients; the key is that having media visibility gives a way for your existing clients to talk about you in a more positive manner; in essence, it gives your clients a more effective way to brag about how great you are and get their friends interested in working with you! This is equally true for public relations and media activity, volunteering in the community, advanced education, etc. It is perhaps especially true for those who have a niche specialty in their business, which goes further than any of the above to help your clients have a very unique, specialized conversation with their friends to refer you in the exact context in which you are the perfect expert to refer. Remember, as the Littlechild research shows, most referrals occur simply because their friend has a specific financial challenge and the client proactively recommends you as an expert/solution; yet if you look at the first pair of referrable/not referrable quotes above... which do you think is more likely to get a new client?
So the next time you're wondering why you don't get more referrals from your existing clients, think a little less about how you ask or how much you ask for referrals, and think a little more about how referrable you really are in the first place!
So what do you think? Is being referrable really relevant with your clients? Do you have any experiences where you received a referral from a client because you were able to fit into a more referrable context like the examples above?
