Stop Putting Clients On the Spot About Referrals

Register now

The vast majority of financial advisors say that they build their business on referrals, but ask them how many referrals they have gotten and closed over the past year, and the figure usually isn’t impressive.

Asked how they generate referrals, most say if they do a good job and the client knows someone, he or she will pass their name along. But that rarely happens.

Clients want to help, but they want to be asked.

During my 30-plus years in the wealth management industry, the referral process has evolved. When I started, we were taught to ask for a referral after a successful trade (yes, back then we did trades).

We were instructed to review the trade with the client to reinforce how brilliant we were to have recommended it and then ask, “Do you know anyone else that may benefit from my advice?”

The problem with this question is that it is closed-end, requiring a yes or no answer. Some very smart people realized that the question needed to be changed to an open-end question such as, “Who do you know that would benefit from my advice?”

But there is nothing systematic about this approach, and it puts clients on the spot to come up with names.

In this scenario, most clients say, “I would be happy to refer clients to you. No one comes to mind immediately, but let me get back to you.”

Typically, they don’t, however, because they get caught up in their lives and forget. The advisor doesn’t ask again for fear of appearing too pushy.

Sound familiar?

The key, however, is to change the process from an essay question to a multiple-choice one.

I learned this technique from Richard Weylman, a top industry coach, and he learned it from Rolls-Royce.

Here are the steps:

  1. Identify the firm’s top clients.
  2. Do some research, and identify key people that they should know in their professional, charitable and social circles. The goal is to compile a list of 10 people to meet that the clients likely know.
  3. At the next client meeting, end by saying, “I have always respected you and enjoyed both our personal and business relationship and am always looking to add new clients like you.” Then show them the list of 10 people and say, “Who on this list do you know, and who knows you, and if you were me, how would you go about meeting them?”

Clients will likely identify who they know and who is worthwhile, and in many cases they will volunteer to make the introduction.
Imagine making this a part of the firm’s process, ultimately, with the top 50 clients. At the end of one year, there would be 500 names to put in front of top clients.

An advisor who received introductions to just 10% of those names would receive 50 referrals/introductions. Doing business with just 20% of those names would open 10 new client relationships, mirroring the firm’s best clients.

Ed Friedman is director of strategic relationships at Dynasty Financial Partners in New York.

This story is part of a 30-day series on how to generate the best referrals.

For reprint and licensing requests for this article, click here.
Client acquisition Referrals Client strategies Practice management 30 Days: Generate the Best Referrals 30 Days 30 Ways