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Why clients give advisors cookies but not referrals

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CHICAGO - Your best clients give you cookies at Christmas. They hug you when they see you. They know the names of your children. But they won't give you a referral.

Why not?

They don't know how, Michelle Donovan, principal at Asentiv, a business coaching firm, told advisors at Schwab's annual Impact conference.

"The key is education," Donovan said. "You have to teach clients how to make referrals. Too many clients self-sabotage their referral process because they believe their clients do know how to make referrals."

So what should clients be taught?

They need to be able to recognize an opportunity for you, Donovan said, and how to talk about the solutions you can provide. Knowing how you prefer to be connected to a new prospect is also important.
"The client should know where you ideally like to meet a prospect," she explained. "For some advisors it may be a restaurant. I have a client who prefers talking in a cigar bar, where he won't be interrupted."

There are opportunities for referrals when clients hear a friend or family member complaining about advice they’ve gotten. "Teach them to be observant and pay attention," Donovan said. "And teach them to overcome an objection when they recommend you. For example, how to respond to someone who says 'Well, I already have an advisor.'"

When clients make a referral, advisors should train them to "take it to the next step," Donovan said. "Teach them how to ask questions on your behalf. What problems is the prospect having? Why are they dissatisfied with their current advisor?"

"Leverage and work with clients who have referred you before," says business coach Michelle Donovan.

Still, advisors need to be selective, Donovan stressed. "Asking the wrong clients for referrals can sabotage your process," she warned.

There are different levels of an advisor’s relationship with a client, Donovan said, ranging from getting to know each other, to building trust and finally a profitable level of very high trust and a willingness to refer and promote you to others.

Focus on the profitable clients. "Leverage and work with those who have referred you before. Then work backwards," Donovan told advisors.

Similarly, advisors need to spend less time with what Donovan called "average centers of influence" such as CPAs, attorneys and bankers when seeking referrals and more time with people who match their target market.

"Everyone is talking to accountants, lawyers and bankers," Donovan pointed out. "There's a lot of competition for their referrals. If your target market is a CEO who owns multiple homes and collects cars, there's less competition for cultivating high-end real estate agents or antique car restorers."

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