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Optimizing Your Client Relationships To Generate Referrals

HOLLYWOOD, Fla. -- Gabriel Garcia, director at Pershing Advisor Solutions, a BNY Mellon company, spoke at the INSITE conference giving advice on how advisors can get more referrals from their existing client base.

 “Revenue declined about 7% from 2008 to 2009,” said Garcia.  During this time, advisors were making less revenue per client, but at the same time they were working more per client.  He thinks today there is an opportunity for advisors, saying, “Now is a good time to refocus.”

Garcia said, “Top performing firms are getting new clients at almost twice the rate of all other firms.”  What are they doing? Why is that happening?  One thing Garcia points out is that they know how to get over the resistance he often hears, ‘We do not want to be sales people and undermine relationships.’

Garcia referenced Advisor Impact information that breaks clients into four categories:  disgruntled, complacent, content and engaged.  He said, “You want your clients to be in a state of client engagement.”  This is the group that gives referrals.  Garcia also referenced a 2010 study that found 70% of new clients come from referrals.

Garcia thinks if advisors are still using old world activities that are working, they should stick with them.  However, for most advisors there is room for improvement.  “4% of your clients are actually giving referrals,” said Garcia, referencing Advisor Impact client study information.  “But 91% are willing to give referrals.”

So why is that some advisors are not asking all their clients?  Why doesn’t everyone like to ask?  Garcia likes to talk about the issue as “the double bind.”  As humans Garcia thinks, “We are wired to help.”  But when clients are put in an awkward position of having to provide a referral while talking to an advisor, they are in a lose-lose situation.  This comes from being worried their connection might not be handled properly, while also not wanting to hurt the relationship with the advisor.   Part of the issue is the pressure of here and now, where a client is put on the spot.

Another issue is when advisors only look through their own perspective.  This happens when the request is all about growing the advisors business.  A more effective approach might be to offer to enrich others’ lives and build relationships.

Garcia feels clients like to refer because of the inherent value of connecting and they can provide a benefit to their inner circle.  He advised, “Tap into it sincerely and authentically.”

Advisors should also be aware of why clients do not give referrals:  These reasons can be that they do not know referrals, they are afraid of the risk of it not working well, they have confidentiality concerns, they might not know how to do it comfortably, or maybe they just do not consider the advisor as part of their inner circle.

More client touch points can help alter behavior.  While this might lead to some incremental work load, it is well worth the effort.  Garcia noted that the average person gets more than 3,000 marketing messages a day.  If an advisor has no frequency, they can be out of sight and out of mind.

Garcia suggests educating clients, even from the beginning of the relationship, about referrals.  During the client orientation, make explaining the referral process a part of the onboarding.  This is not putting the client at risk of feeling awkward; it is just to educate them that, if they want to, they can give a referral, and here is how it works.  If advisors take a pause before going on to the next topic, they might even have clients fill the silence with a referral.

Next Garcia recommends talking about referrals a part of client reviews.  He said, “Only about 30% of clients give referrals, even though 90% say they are willing.”  He suggested categorizing clients in categories.  “People that have come from a referral are twice as likely to also give a referral,” said Garcia.  On the opposite side, there might be some clients that are very private that might never give a referral as it is not in their DNA.  Garcia says, “It is still ok to educate them.”

Before talking with clients about referrals, Garcia says, “You want to check for value delivered and value received.”  Ask how you are doing.  If you get a positive response, that opens the door for referrals.  Garcia advises, “Don’t have the conversation if you do not get a positive response.”  As this is an important aspect to growing one’s business, Garcia recommends, “Role play, so this comes out polished.”

Garcia suggested using letters, newsletters, appreciation cards, referral clubs, client surveys, and client advisory boards.  This helps advisors stay top of mind and educates the clients.  He suggested every website should have a ‘how to introduce someone to the firm’ button on the homepage.  Related to surveys, Garcia knows advisors can get wonderful feedback.  He sees these work well when an advisor asks for feedback, the clients gives it, the advisor takes action and then as a result the advisor sees a spike in satisfaction.

Garcia said, “You need to think about defining your ideal client profile.”  This allows your clients to know what types of referrals to give. 

It does not stop with clients.  A team culture should be built around referrals.  Garcia promoted having accountability, saying, “There should be a goal for individuals and the firm.  There should be regular internal communications (e.g. weekly meetings.)”  He added, “Build a marketing strategy and engage the entire organization around it.”  Garcia sees discussing referrals internally as key components to success.  He believes, “If it doesn’t get measured, it doesn’t get done.”

In many cases an advisor and the staff might need coaching and mentoring.  Formal training helps launch the effort company wide.

Garcia recapped what advisors should do when they return to their offices from the conference:

Evaluate referrals

Get language in place to use in the process

Refine the ideal client profile

Develop referral goals

Mike Byrnes founded Byrnes Consulting to provide consulting services to help advisors become even more successful.  His expertise is in business planning, marketing strategy, business development, client service and management effectiveness, along with several other areas.  Read more at http://www.byrnesconsulting.com/.



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