Only Fools Rush Into Referral Accounts

Having a referral throw a new account into your lap is hardly ever a bad thing, but jumping into a new relationship helter-skelter can lead to unnecessary problems. Plus, you could miss valuable opportunities for additional referrals.

Jim W., a Canadian advisor, wanted advice on how to handle such a spontaneous, new account. A woman who had been referred to him moved over $250,000 to him, citing the fact that he came “highly recommended” as her reason, and left without so much as bringing up the topic of investments. Additionally, she mentioned that her husband might want to bring his assets over, too, but that he would need convincing.

Wanting to leverage this new client and potential advocate, Jim asked Bob David, Horsesmouth Director of Advisor Programs, “How do I approach the husband and also ask for other referrals from her right away?”

The first thing Jim should be doing, Bob suggests, is to do some digging into what exactly brought the referral into his office. “It’s vital here to get a much better understanding as to why you came so highly recommended in the first place and by whom,” says Bob. “This gives the context which in turn allows you to get client-centric, do some detective work, and create a network map that will lead to the right introductions.”

This understanding of the new client’s motivations is vital, as knowing the problems they came to you to solve will let you offer to help any of their friends in similar situations. In Jim’s case, that includes the husband as well as other potential referrals.

Bob additionally cautioned Jim to slow things down with his new client. When things get rushed, the chance of miscommunication increases and mistakes can be made to tarnish the new relationship. Bob recommends saying something akin to the following:

"I can appreciate the value of your time and that you are in a hurry—my time is valuable also. But you've worked hard to accumulate this money, and I want to do make certain we do what's best. I find it’s mutually beneficial when we take the time in the beginning to be thorough in our planning, so what I suggest is setting a time to come in and do this right....does that sound like a reasonable approach?"

Part of the beauty of referrals is that prospects come to you already confident of your abilities and in most cases pre-qualified. But just because a referred prospect is an easier client to take on, doesn’t mean you should race into the relationship. Doing so could damage the relationship and cut-off the possibility of gaining even more referrals.

Asking for Referrals: Overcoming 3 Fears

It’s an oft-repeated axiom that that the hardest part about completing a task is starting it. This is certainly true about asking for referrals, and often what gets in the way is plain old fear. Horsesmouth contributor and president of Referral Coach International, Bill Cates, has identified three common fears that keep advisors from asking for referrals and given solutions:

1. Fear of appearing pushy. Almost all advisors out there will tell you they don't want to appear pushy or hurt their relationships by asking for referrals (there are some "old-school" agents who haven't learned better yet). I certainly understand this concern. But here's the good news: To move through this fear, all you have to do is find a way to engage your clients in a referral conversation that is not pushy—and will not hurt a relationship.

Don't assume they are willing to talk referrals; your first move is to get their buy-in to the referral conversation. Confidently ask for permission to talk about introductions. Give clients the opportunity to say no. Don't back people into a corner. At all times, let them feel in control of the conversation.

2. Fear of begging. Many advisors don't want to look unsuccessful or needy with their clients, but all you have to do is find a way to engage your clients in a referral conversation that doesn't come from a needy place. Instead, come from a place of confidence, success, and value.

Stay away from the old style of making referrals be all about you: "I get paid in referrals." "I'm trying to build my business and I really need your help. Please! Please!" Make your referral conversation about the value clients have recognized in their work with you—and sharing it with others. Get in the habit of always checking in with your clients to make sure they see the value in your processes and in your relationship. (This is usually best done in person, but it can be done over the phone if part of a scheduled phone appointment.) Focus on the importance of the work that you do and bringing that important work to others.

3. Fear of hearing "No." Successful, confident, and even cocky advisors can turn into a bowl of Jell-O when they face the prospect of a client turning them down in their request for introductions to others. Many advisors can dial for dollars until the cows come home, yet they are afraid a client may not want to give them referrals.

How do you deal with this fear? Just get over it! First, you are only going to ask clients who have seen value in your work and like you. Second, assuming they find the previous point is true, if a client doesn't want to give you referrals, it has nothing to do with you. It's their fear. It's their baggage from past experience. Just practice the "Zen of referrals." Ask for referrals without being attached to whether your clients say yes. Focus on your actions, not the results of your actions. Control what you can control. You can't control whether a client wants to play the referral game with you, but you can control moving through your fear and asking.

If these fears hit close to home, make sure to read the full article, "Asking for Referrals: Overcoming 3 Fears," (free registration required) to gain additional insight into defeating them.

Rid Your Clients of Common Referral Objections

Advisor Amy Berk from Denver, CO, was running into a wall with her referral efforts—actually, she was running into three: three objections she was getting from her clients when she asked them about referring.

They were:

1. "I don't talk to people about their money."
2. "I don't know anyone."
3. "I already gave you referrals."

"How do you handle those nasty objections?" Amy asked.

These objections and others like them can bring a referral conversation to a screeching halt. How do you not only address these objections, but do so in a way that makes the client genuinely want to give referrals? 

Bob David, Horsesmouth Director of Advisor Programs and leader of the Automatic Referrals Jumpstart Program, had this to say about overcoming the first of Amy's objections: "When someone says they don't talk to people about their money, it's most often because we haven't positioned the request in a client centered way, and it needs to be more focused on exactly what you can do to help the person you're asking to be introduced to." If a client sees that you can help a peer with a problem they've been struggling with, they won't have reservations about bringing your name up.

As far as addressing the "I don't know anyone" objection, Bob stresses the importance of specificity. "Clients need to understand who we can best help, why or what problems we can solve before they can go through their mental rolodex and get a picture of someone in their heads," he says. Your client probably knows plenty of people who would make for an ideal client, but they have no idea what criteria define one. It's your charge to make sure they know exactly what services you can provide so that they have a clearer picture of who could benefit from them.

When a client says, "I already gave you referrals," it's a definite sign, Bob points out, that the requests are coming at the wrong time. You need to make sure that you haven’t been over-zealous in your referral requests.

The one mistake you can make with these objections, or any objection for that matter, is to let them stop you. Any concern a client may have can be addressed and overcome.

Getting Referrals in An Ugly Market

In a market like this, just heading into the office every morning can feel like climbing Mt. McKinley, so the thought of asking for referrals might seem utterly insane. But veteran advisors will tell you that, in a tough market, opportunities abound for those with the patience to seek them out.  I know advisors who have doubled or even tripled their business during bear markets. 

How do they do it?  First and foremost, they focus on maintaining and strengthening their existing relationships.  In a market like this, you need to treat every client relationship like gold—and protect it like Fort Knox.

If you have one priority right now, it needs to be proactively getting in front of your clients. Call them, e-mail them, send them letters, talk to them in as many ways as possible.

Can it be tough to make those calls when performance is lacking?  Sure. When the market is whipsawing everyone around, it's only natural to get into a siege mentality. Whether you've been in the business for five months or 25 years, the last thing you want to do is to pick up the phone and deal with a whining client. But you have to bite the bullet.

The best way to guard against the ostrich syndrome is to build client calls into your daily action plan—and, ideally, into your business plan (free registration required). If you have something on paper that says you will call your clients every month, you'll do it. Yes, it's true that clients may not be thrilled with their results—but they will be a lot happier than if you didn't call at all. 

Some advisors even take their show on the road in markets like this. I once interviewed an advisor who logged almost 25,000 miles on his car during the last big bear market. He even visited out-of-state clients while on vacation. His family wasn't too happy with him, but he kept those client relationships intact.

What you need to understand is that right now, most of your competition is hiding.  If one theme resonates among successful veteran advisors, it is the tremendous business-building opportunity that exists in difficult markets. There's a ton of business to be won from the walking wounded among your competition. Clients start looking to "change doctors" when things get scary.  And they talk to their friends and family about their fears and concerns.

So be sure to build measurable referral targets into your business plan this year.  Keep your ears open for referral clues. And don't let external events distract you from your plan. To quote business coach and Horsesmouth contributor Joe Lukacs (who has a great weekly business development audiocast, by the way): "It's so easy to sit back and say, 'It's bad; the market's bad.' You absolve yourself of responsibility for your success, you become a victim, and you get a big pity party going. The people who are succeeding refuse to be victimized. They take total responsibility for their world."

Check out these articles on dealing with an uncertain market (free registration required):

10 Rules for Reassuring Clients in Volatile Markets
When markets are volatile, we're more stressed and so are our clients. That's when it's more important than ever to articulate our recommendations and provide reassurance of a positive outcome. Here are 10 rules of effective language.

Calm Edgy Investors by Renewing Their Goals
Market gyrations make for squirmy clients.  Mellow them with some sage guidance.

Cultivate Opportunities in Trying Times
When the going gets tough, the public should be more aware of your services than ever. Here are some ideas on communicating the value of your services during the best and worst of times.

'Tis the Season for Referrals

Christmas is only 5 days away. I know this without even thinking about it, because my kids have been asking me every single day for two weeks now how many days are left until Christmas! I can do the math in my sleep at this point. 

So I understand that right now, your mind may not be focused squarely on your business. But I want to remind you that the holiday season brings a special gift to financial advisors who know where to find it, and how to unwrap it. 

Right now, your clients are going to lots of holiday parties. They're seeing friends, and may be preparing to spend a good chunk of time with family. Many of them are thinking a lot about giving, and bonding, and what makes life worth living. 

Come January 2, all of this activity and thought will add up to a treasure trove of valuable information that you can unlock to generate more referrals.  As we've discussed in past articles here, one of the keys to a good referral strategy is putting on your detective hat and learning more about who your clients know.  As any good detective knows, asking the right questions can make all the difference. 

Here is your assignment for the remainder of the holidays, and for the month or so afterward. Turn that standard post-Christmas chit-chat with clients into a real priority. Ask every single client what they did for the holidays. And then, when your client tells you how lovely it was to see her new baby granddaughter enjoying her first Christmas, don't just say "that's nice" and then turn the discussion to how you want to change her asset allocation in 2008.  Ask more questions. Dig deeper. Recognize the information for what it is: an opportunity. Make a note of the information you hear so you can follow up on it later.

Ask where your clients spent the holidays.  "Did you host family?" "Did you go to any interesting parties?" "Oh, you vacationed with friends in Arizona?  Who are the friends, and where did you stay, and how do you know these folks?"  "What was the most interesting gift you received?" 

What you hear won't always be positive. The holidays can be a difficult time, people's lives aren't always going smoothly, and of course, friction can arise during those heartwarming holiday visits. If a client reveals this type of information, don't brush it under the rug or try to change the subject. Engage it. "Oh, your sister's husband just left her?  That must have been very difficult at the holidays. How are she and your niece and nephew handling it?"

You will be amazed what you didn't know, and what you'll learn, about your clients and their connections. Some of those connections may end up becoming clients, when you learn to ask more questions about them, uncover their needs, and ask for introductions.  Make sure to document every scrap of information, so you can follow up on it later. 

Oh, and there's no need to wait until after the holidays to put on that detective hat.  Any conversation you have with a client between now and year-end should include some good questions (and at least two or three follow-up questions) about their plans.  Even if they don't celebrate Christmas, you can still ask about what they'll be doing for New Year's, or whether they will be taking advantage of the season to get some vacation time in with family and friends.  For example, I asked a colleague recently what she was doing for the holidays, and she told me that her grandmother has recently been diagnosed with Parkinson's disease, and is coming to terms with the fact that it's getting to be too difficult to care for her home and her husband. This all came out in a very simple exchange (I asked one question and one follow-up question ). 

Hopefully, as an advisor, you already see the opportunity that would be opened up for you if you had this conversation with a client—especially if you just happen to have experience working with elderly clients facing similar situations.

While you're processing these suggestions, keep in mind also that the holidays are a great time to re-connect with the idea of referrals as "client-centered."  Focus on referrals as a way to give to your clients, not take from them... and you'll find that it gets much easier to ask for those introductions.

Good luck, and Happy Holidays from all of us at Horsesmouth!

Five Great Times to Ask for Referrals

One of the referral questions we hear most often from advisors is, "When should I bring up the subject?" Referral expert Matt Anderson tackled this topic in a recent Horsesmouth article, suggesting these five excellent times to talk about referrals:

1. During a formal client meeting, after you've confirmed the value that you've brought to the client thus far.

2. Just after the meeting. For instance, you can casually ask while you're walking to the door of the office or to your cars. Matt says he likes this time because the other person is more relaxed. You're most likely talking about something informal, such as what the client is doing over the weekend. Then you can pivot back to business by asking, "Oh by the way, when we were talking earlier, you mentioned"... and now you get specific:

• Speaking at a company event
• That your parents live nearby
• That you thought your business partner might benefit from doing the kind of work we've been doing

Then ask:

• What would be a good way to organize that?
• Would you mind seeing if they'd be open to a quick conversation with me?
• Do you think the three of us should have lunch sometime?

3. On the phone as you inquire about some value you added to the client. Give first, Matt explains... then receive. Send the other person some referrals or sales ideas.  Tell them about an event that might interest them (or even invite them to go along with you, if you have a membership or exclusive access).  Create an "emotional bank account," Matt explains, and get a decent account built up. Then you can start making some withdrawals in the form of referral requests.

4. While having lunch, coffee, or a beer—again, once you have provided value. 

5. When your gut tells you. Listen to your gut, urges Matt. Sometimes you just know you've established a good rapport and can ask for what you want. This sense usually develops with experience.

For the complete picture, read Matt's Anderson's article, The Best Time to Ask for Referrals, in its entirety (free registration required).

The ABCs of Automatic Referrals: M is for Mantra

You’ve most likely heard the tongue-in-cheek phrase, "It’s all about me." People use it as a joke, but typically, that’s how advisors think about referrals: in a self-centered way.

That may seem only natural. After all, the point is to get more clients and more assets, right?

Well, yes. But there’s a problem. Positioning referrals in terms of yourself and your business runs counter to basic marketing principles, which dictate that we must always put the client’s interests first.

There is a much more effective way to think about referrals: the client-centered way. This paradigm is all about bringing value to your client relationships, enhancing their lives and the lives of people they know. Not only will this approach motivate clients to provide you with more names and introductions, it will make you feel better about asking in the first place.

Make this your mantra: Referrals are about helping clients and the people they know.

Instead of asking clients to go out of their way to help you, let them know that you’re never too busy to help them, and by extension their family members, friends, and business associates. Instead of thinking of yourself as scrounging for new clients, realize that you are offering the benefits of your guidance and expertise to the people your clients care about the most.

There are three core beliefs at the heart of the referral mindset:

1. You provide value.
2. Your clients and colleagues recognize and appreciate your value.
3. Your expertise can help some of the people your clients know.

Close your eyes and feel the truth of these statements. You are helping people right now. They know others you could help. But the only way they’re going to know you can help is if you offer. And that's how you should be positioning your introduction and referral requests.

The ABCs of Automatic Referrals: K is for K.I.S.S. (Keep It Simple and Specific)

How many times have you asked for referrals and heard the reply, "I’m sorry, I can’t think of anyone off the top of my head?" I bet it’s a lot.

Advisors tend to assume that the reason for dismal results like these is that their referral sources are reluctant to provide names. While this may occasionally be true, the "I don’t know anyone" response is much more often the result of asking referral sources to work too hard.

Our brains are essentially databases that we scan when we need to retrieve information. When you ask a client for a referral, she has to scan her entire "database" of acquaintances (which numbers in the hundreds, at least) and then narrow down the possibilities to come up with one or two names, all in a matter of minutes. Chances are she’s going to draw a blank. 

That's why, when you ask for a referral, you have to give clients some simple and specific details to help them define and target their "search."

Let’s say one of your fellow members of the Chamber of Commerce, Mr. Jones, owns a busy café on your town’s main drag and is an active member of the state restaurant association. And restaurant equipment suppliers just happen to be one of your target markets. If you ask Mr. Jones the generic question, "Can you think of anyone else who could benefit from my services?" it probably won't even occur to him to look in the "suppliers" section of his mental database. But how about if you get very specific? What if you were to say, "I have a number of clients who own equipment supply firms, and I've done a lot of work helping them with setting up 401(k)s for their companies and preparing to sell their businesses (free registration required) when they're ready to retire. Do you think you could introduce me to some of the suppliers you deal with, so I can find out if they might need that type of help?"

Mr. Jones now knows precisely which mental file cabinet to open. And that file drawer just may contain some stellar referrals for you.

The ABCs of Automatic Referrals: I is for Introduction

f you've been reading this blog for any length of time, you've probably noticed that we stress asking for introductions over asking for referrals. Why is that?

Well, in the best of all possible worlds, you would get a personal introduction to every new prospect with whom you want to do business. An introduction is nearly always better than a referral, for a number of reasons.

• A face-to-face introduction boosts your credibility. Even though your client may never directly endorse you, the prospect will infer such an endorsement. That implied endorsement is tremendously important, especially when you're dealing with high-net-worth prospects—because the research says that these prospects want to establish their financial advisory relationships through referral or introduction. When your client actually introduces you to their friend or family member, the trust the friend or family member feels for the client automatically extends to you to some degree. We call this "the credibility glow."Sometimes clients will go the extra mile and endorse you.They might mention what a great job you've done for them, or tell the prospect they would be crazy not to meet with you. It doesn't get any better than that!
• An introduction often makes clients more comfortable because it lets them keep some control over the relationship. Some clients are nervous about handing over a name and number because they don't know if the person they're referring is interested in hearing from you. They also don't know what you are going to say or do once the information is in your hands. What if you're pushy or embarrass them? With an introduction, they get to mediate and ensure that the meeting happens on THEIR terms. Introductions in social settings can also feel less pressured and more casual.
• Introductions give YOU more control. They allow you to be more proactive about scheduling a meeting and making it happen. Isn't it better to be scheduled for brunch on Sunday or golf on Friday afternoon, rather than waiting for the client to call with a name and phone number, or trying to chase down a referral?
• Face-to-face introductions let you do the Malcolm Gladwell "Blink" thing.  This is especially true in a social context. You can look the prospect in the eye, shake his or her hand, and get a feel for whether or not this person is someone with whom you want to work—BEFORE you try to solicit the business. This can save everyone embarrassment and trouble down the road.

So next time you're preparing to ask for a referral, think "introduction" instead. And let us know about the results you get. We love to hear from you.

9 Tips for Referral Success In a Choppy Market

A sales manager in Canada called today looking for help talking to his advisors about asking for referrals in a volatile market.

Here is a key rule to remember at times like this: look around you, see what everyone else is doing, and then DON'T do that.

During choppy markets, most advisors have their heads stuck firmly into the sand.  They're hiding. But this is no time to hide. This is the time to INCREASE your visibility and show your clients just how great you really are.

1. First and foremost, make sure YOU are calm.  Reacquaint yourself with what you really believe and what your real value is.  This is a great time to get clear about what you actually do to help clients,  what is special and unique about you, and why a client working with you and your firm is better off in this market than a client working with another advisor, or going it alone.

2. Take proper care of your clients.  Your best referral strategy in a volatile market is to make your existing clients feel cared for and special.  They may not even be feeling especially concerned about the market, but you will make a big impression when they get that call from you saying "I thought you might have some questions or concerns about your portfolio and I wanted to call and put your mind at ease."

Again, remember, most advisors will NOT be proactive in a difficult market.  The referrals will come naturally if you show your clients you care enough and are confident enough to get out in front of the problem.  Just think about how you feel when you can't get a wholesaler to return your calls when his funds are tanking—and how much you appreciate those wholesalers who not only take your call, but who reach out to you proactively when there are performance issues, even if you don't have a ton of money in their funds.  So reach out and call every single client. Even the smaller ones. Even the ones whose portfolios are in the toilet.

3. Be ready to answer clients' questions in as much detail as possible. Be prepared to offer them specific comfort—not platitudes about how the market always goes up again, but details about how THEY are protected from disaster and why THEIR financial future is not crumbling before their eyes.  Put what they're seeing on the news into perspective based on their specific investments and your particular investment approach. 

4. Be a good listener. Sometimes clients just need to vent. This may be their life savings, after all.  Don't be defensive. But once they've vented, be prepared to explain to them how they are protected from the volatility, and focus on the ways that YOUR advice and counsel are contributing to helping safeguard their financial lives.

5. Watch and listen for referral opportunities.  In this environment, clients may mention family members or friends who are having problems, feeling scared, or being neglected by their current advisors. They may mention people they know who have been do-it-yourselfers but are now rethinking that approach, or who are otherwise unhappy with their investment situation.   

Be prepared to jump on those opportunities when they arise by talking about how you might be able to help those people.  "I can understand that your friend is frustrated and nervous that she can't reach her advisor.  If you think it might help, as a favor to you, I would be happy to sit down with her, take a look at her portfolio, and give her my perspective." 

6. Remember YOUR unique value proposition. If you happen to specialize in defensive investing or have special value to offer in a volatile market, be ready to mention that.  And even if you don't, remember that in your client's eyes, YOU are the expert. You have knowledge that you can share.  Offer to share it.  "Wow, it sounds like your mother is feeling very worried.  Would you like to bring her in to chat, and perhaps I can help put her mind at ease?" 

7. Listen for referral cues. During volatile markets, you're likely to hear compliments and recognition of your value from some of your clients.  You can probably guess which clients those will be—they're the ones whose portfolios are doing well, so they're likely to be feeling happy and grateful when you call them to discuss market conditions.  If a client does rave about how well his portfolio is holding up or what a great job you've done protecting her from volatility, be ready to leverage that compliment, because there's no better time to ask for an introduction or referral.  Learn to recognize praise and gratitude as a referral opportunity. 

8. If you have a newsletter or firm literature that offers valuable insights into what's happening in the market right now, you can offer to send it to people your clients know.  To add some urgency, you can mention that you're preparing a mailing right now because you want to get the word out to your existing clients quickly, to allay their concerns, and if they know anyone they think would find the information helpful, you'd be happy to include them in the mailing.

9. Continue using the same network mapping and targeted introduction strategy you've hopefully been using (the one you learned from Automatic Referrals), but in this environment, try to focus your efforts especially on clients who:

• are happy with how their portfolios are doing
• seem to have performance in good perspective
• have made it clear they value you for more than just their performance

Remember, change and uncertainty can be huge drivers of opportunity, as long as you're prepared to harness them.  Referrals happen because your clients recognize your value.  And there is no better time to prove your value than a choppy market!

Have You Earned the Right to Bring Up Referrals?

A big concern that we often hear from advisors is, "I'm afraid that I haven't proven myself enough to my clients to talk about referrals."

I certainly agree that until someone trusts you and believes in you, there is little point trying to position yourself as someone to whom they should refer their family or friends.   However, it's also fair to say that most of your clients would not BE your clients if they didn't feel this way about you.  Many advisors many advisors feel irrationally insecure about where they stand with their clients. This goes back to the whole issue of undervaluing yourself.

If you generally feel secure about your value to clients but have red flags waving about one client in particular, heed them! Hold off trying to get introductions from that client until you've uncovered what's going on, and if your uneasy feelings are justified.  If you have real reason to avoid discussing referrals with that client, you've got bigger problems than referrals—you've got a client at risk, and keeping that client should be your top priority.  Where they are concerned, worry about the referrals later, and focus those efforts on other clients about whom you feel more certain.

However, if you experience these insecure feelings about most or all of your clients, chances are very good the problem is in your own mind—and you need to do something about that.  In addition to doing some referral confidence-builders, another remedy is to start soliciting client feedback more actively.  You can survey your clients, form a client advisory board, or just ask some good questions at meetings and really pay attention to the answers.

When you do solicit client feedback, stay alert for positive comments. They are door-openers for you to discuss referrals.  For example, one advisor who went through the Automatic Referrals Jumpstart Program was conducting a quarterly review with her clients, a married couple who were both medical technologists, and they were marveling at how well their funds had done.  The advisor had been wanting to penetrate this industry and get more medical technologists as clients,  so she jumped on that opportunity and said, 'Do you know a lot of people you work with who maybe don't have this type of portfolio? What about your trade association?' And they said, 'Of course!  We'll send you the roster.'  The advisor got 50-something names and email addresses and phone numbers because she recognized the client's praise and gratitude as a referral opportunity—and because she knew how to ask for referrals in a targeted way.

The articles listed below (free registration required) are just a few of many resources on Horsesmouth that can help you figure out the best approach to getting more feedback from clients—and open more doors for referral conversations.

Survey Your Clients Now!
The benefits of surveying your clients are enormous, and yet less than 1% of advisors have ever sent out a formal questionnaire. Find out exactly what you're missing by not surveying your clients.

Ask Your Clients, 'How Am I Doing?'
If you're not sure what your clients think of you, ask them. Here's a step-by-step approach to using a client advisory council to elicit the most useful feedback from your top clients.

How Well Do You Listen to Your Clients?
Many FAs have no structured method for compiling feedback. Business practice expert Tom Olivo shares strategies for measuring client loyalty and alerts you to its significance for your business.

Avoiding Conflicts of Interest with Friend and Family Referrals

We're continuing to revisit some of the great questions we received during our Referral Clinic and Blogathon.

Today's question comes from Shane, an advisor in Richmond, Va. and will be answered by Michael Brizz, creator of the Referral Mastery System.

Question: "Should you approach the referral process differently if you perceive a conflict of interest for your client? For example, your in-law's family is successful and you work with your in-laws. What is the best way to ask them about their brothers/sisters and not have it feel as though they'd be referring you based solely on your marriage?"

Michael Brizz's answer: Keep in mind that the reason for the referral is to help the referral, NOT you.  Therefore, it is important in your qualification process of the in-laws to learn about them and ways you can help them. 

When you do this, it becomes very easy for your client to refer you because there is a relevant reason for the introduction.  Your client would happily refer the heart surgeon who saved his life to a family member with a heart problem.  Your client will also refer you if there is a relevant reason for the referral.  Rather than try to get referred to many of the in-laws at once, focus on learning a lot about a few—starting with one. 

How to Avoid Sub-Par Referrals from Other Professionals

We're continuing to revisit some of the great questions we received during our Referral Clinic and Blogathon.

Today's question comes from Chris, an advisor in San Diego, and will be answered by Ginita Wall, co-founder of the non-profit Women's Institute for Financial Education and author of eight books, including The ABCs of Divorce for Women. We asked Ginita to respond to this question because she has long experience in co-marketing and collaborating with other professionals to conduct seminars for women who are going through divorce.

Chris' question: "How do you position yourself to ask politely for referrals from another professional (attorney, CPA) so that you are not in the uncomfortable position of turning away non-ideal prospects (i.e. too small, too conservative) that are referred to you?"

Ginita's answer: It’s kind of like training a dog, where you reinforce good behavior, and reprimand bad behavior.

Here’s what I mean—when you get a referral that’s wonderfully appropriate, call the professional and thank them right away. Tell them exactly what there was about the client that fit you to a T, and how specifically you are going to be able to help the new client.  Then you might even send a little gift to the referral source, just to thank them again.

When you get a referral that isn’t appropriate, make sure that you have a list of advisors who work with smaller clients so you can refer them on. Then call your referral source, and tell them, "Thank you for sending the client.  He/she wasn’t quite right for me and I referred them to so and so." Then say, "I am always happy to be a resource to help your clients find what they need, but let me tell you about the type of client that fits my practice, just so you know for the future."

When you are asking for referrals from someone who has referred good clients to you before, begin by thanking them for the old referral, and telling them what a good job you’ve done for the client and how happy the client is. That will reinforce what kind of client you are looking for.

When asking for referrals from someone who has never referred before, tell a story about a perfect referral you got from another similar professional, so that the source can picture what kind of client to refer. You could even add, "Sometimes I get referrals of clients who are not quite right, for example [fill in why they aren’t the type you work with], but I am always able to find someone good for them to work with." That lets the referral source know the standards you set for yourself and that you intend to stick with those standards.

Here's a case study about how an advisor succeeded (free registration required) using Ginita Wall's Second Saturday divorce seminar format—and a discussion board where you can ask Ginita Wall questions about putting together a divorce seminar that gets results.

Want Better Referral Results? Seek Introductions.

I just came across a great little tidbit from the Dallas Morning News (it was published in September, but other papers have been picking the article up since then). 

McCord and Associates, a consulting firm in Houston, conducted a referral survey that confirmed what we found in our advisor survey a couple of years ago: "Referral generation is the cheapest way to prospect for clients and the most effective way," McCord said. "And more than 85 percent of salespeople are atrocious at it. "

McCord also teaches that getting referrals is much more than collecting names and phone numbers. "For me, a referral is an introduction, either a letter, a phone call or lunch," he said. "It's an introduction to someone who has the need for whatever the product or service is and the means to acquire it."  Unfortunately, McCord observes, "too few people take the time to develop the habits to forge these strong relationships."

This concept—that you should be seeking introductions, not names and numbers—is at the heart of the Automatic Referrals process.  Getting introductions requires a much more sophisticated methodology than most advisors employ—but when you learn that methodology, the process is much easier, much less painful, and much more rewarding than most advisors think.

What to Do When a Referred Lead Doesn't Call You Back

1. Just back from Toronto and the Dundee Wealth Management annual advisor conference, where I delivered a referral anxiety breakout session.  It was standing-room only in the 200-seat room—once again demonstrating how pervasive and common this issue is! 

An attendee asked a great question during the Q&A that we hear often from advisors: What do you do when a client gives you a name and number, but you get no response when you call the referral, even when you leave multiple messages?

First answer: prevent the problem altogether by focusing as much as humanly possible on introductions rather than referrals.  Not only will this help you avoid having to track down the referred prospect, introductions are much more potent and effective anyway.

That said, if you do find yourself in this situation, your best bet is to go back to the referral source.  You certainly don't want to whine or act as though you expect them to fix the problem.  What you can do, though, is call to update them on the status of the referral (this is something you should consider doing as a matter of routine; many clients like to be kept in the loop, and the more you keep them informed, the more they will view themselves as partners in your success). 

You can say something like this: "Hi, Joe. You were so nice to refer Dan Rogers to me last week, and I just wanted to keep you in the loop on what's happening.  I've left Dan a couple of messages and haven't heard back from him, but I'm hoping to make contact soon."

One of two things can happen at this point.  The best-case scenario is that Joe will proactively say something like, "Oh, really, Dan hasn't called you back?  I'm surprised, I think he would really be interested in [product or service you offer].  You know what, let me give him a call and suggest he get in touch with you." 

Bingo.

On the other hand, Joe might say, "Oh, ok, well, thanks for the update."  In this case, put in a few more calls to the referral, making sure that they are well spread out—no closer than a week apart. The last thing you want is to be seen as a "stalker" and have that get back to your client. If your calls still go unanswered, you can get in touch with your referring client again. "Joe, I wanted to thank you again for your referral to Dan Rogers.  Unfortunately, I still haven't been able to get in touch with him."

At this point, you can take the conversation in a few different directions based on how important this referral is to you, how strong you believe the referral was to begin with, your source's response when you first called him to update him, etc. 

One direction: "I don't want to be a nuisance, so I won't be calling Dan for a while. I will plan to get in touch with him again in six months or so to see if the situation has changed at all. But I do very much appreciate the referral."  Joe may shrug his shoulders and simply appreciate that you kept him updated on the situation. Remember, not every referral works out. It's always better to walk away than to risk hurting your relationship with the referral source. 

Alternatively, if you believe the situation warrants it, you could actually ask Joe for a face-to-face introduction at this point, or ask if he has any ideas about how you might be able to reach the prospect, or if you can pick his brain about specific issues that might resonate with Dan.  He might even offer help proactively because he thinks it's a shame that you haven't been able to connect with his referral.  In this case, he might offer to make a call on your behalf, or introduce you to Dan personally.

But to reiterate, the best way to remedy the problem of unresponsive referrals is to avoid it altogether.  Start asking for introductions instead of names and numbers. You'll get better results all around.

Advisor question: How do I handle performance-based objections?

Today, the answer to another question submitted during our Morningstar Advisor webinar "How to Trigger Natural Client Referrals by Conquering Referral Anxiety" (replay available here).  This one comes from J., an advisor with Charles Schwab:

I have been asking for referrals and the clients say, "Okay, I will think about and it and get back to you after seeing the portfolio performance."  So what does that  mean?

Well, to me it means a couple of things. First is that you're asking the wrong clients for referrals, and/or asking at the wrong time.  Second, you may want to rethink your value proposition and how you are positioning yourself in the minds of your clients and prospects.

These particular clients have not yet decided that you are referable.  Either they haven't been working with you long enough, or for whatever reason, they are not yet convinced that you are bringing them the kind of value they expect. And you will never get high-quality referrals from people who don't have full faith in you.

Learn to listen for statements indicating that clients recognize your value and how much you're doing to improve their lives, and use those statements as indicators that it's time for a referral conversation.  For example, one advisor who's had great success with our Jumpstart Program told us this story about a couple she works with:

"They had been clients quite a few years, and they were marveling at how their funds had done. They have almost a seven-figure portfolio at this point.  So I said, 'Do you know a lot of people you work with who maybe don't have this type of a portfolio?  What about your trade association?' And they said, 'Of course! We'll send you the roster!' and all of a sudden I get 50-some names and email addresses and phone numbers."

Notice that she positioned her request in response to specific value-recognition comments made by the clients.

If you're not hearing any of those types of comments, ask yourself if you're engaging in enough conversations about their expectations and your service. Try asking more questions, such as "What have you found most valuable thus far in our working relationship?"  Make sure you're conducting a sufficient number of reviews with your best clients, because quarterly and annual reviews (especially when performance has been good) are terrific places to have conversations that lead to confirmation of value—thus providing a great opportunity to ask for a referral or introduction.

It also sounds as though, in these clients' minds, your value equals their portfolio performance.  Performance matters, of course, but if that's the only thing they're thinking about, something is missing. You're trusting your professional fate to the ups and downs of the market—and even if you're consistently able to achieve fabulous performance, you're limiting your ability to differentiate yourself from the competition.  What if another advisor comes along who can point to good performance? What will stop your clients from defecting? 

Job #1 for you is figuring out what is special or unique about you?  Step back and invest some time and energy in your value proposition, your branding, and your client service and communication strategy. When those pieces come together, referral conversations will flow more naturally, and I suspect you'll start to find that your other marketing and prospecting strategies get easier too.

If you need help, Horsesmouth is loaded with resources on these and related topics. For example (free registration required):

The 'Everyday Advisor' vs. the 'Branded Advisor'
When you follow the three key elements of a disciplined branding system, you'll absolutely clobber the competition. The reason: A focused, concentrated effort shows people who you are, what you stand for, and why it matters. Compare that to the "everyday advisor" and see the difference for yourself.

6 Ways Value Statements Boost Business
A value statement is not just a catchy marketing slogan—it's a tool that enables you to set more meetings, close more sales, and make clients tell their friends you're the best FA they've ever had.

A 6-Step Client Service Strategy That Works
A Horsesmouth member called recently and said he needed to create a systematic client service strategy—fast! We said we could help. Here's the action plan.

The difference between a "working by referral" business and a "word-of-mouth" business

I just read a short but astute interview in Real Estate News online with a business coach named Kim Ortega, in which she explains the difference between "word of mouth" marketing and referral marketing.  Here's how she boils it down (but do read the interview for more detail):

A word-of-mouth business is defined by salespeople who are passive and wait for referrals to come their way.... You are playing a waiting game versus having a plan of action.... In a working-by-referral business, you have a confident expectation that your actions will produce incoming business. You know who your advocates are, and you have a structure in place that allows them to help you build the quality of your business by asking them to introduce you to the type of client you want to work with.

In the long run, you work harder in a word-of-mouth business, not smarter. Word of mouth depends on chance. You will eventually learn your beloved friends and clients are not concerned about sustaining your business. You are the one who must step up and make the effort.

If you've already read Automatic Referrals, this should sound familiar. Only about 20% of your client base—your "raving fans"—will proactively refer to you. 

Why not the other 80%?  Well, it's not because they don't WANT to refer to you. It's because THEY'RE NOT THINKING ABOUT YOU.

You, of course, are hyper-aware of the need to build your business—and it's only natural to project our own concerns into other people's heads. But your clients have their own problems. In their eyes, you're not a  businessperson worried about making this month's asset goal or mortgage payment. As far as they're concerned, you're the financial expert who helps them manage their money so they can meet their asset goals or make their mortgage payment on that third house they just bought.  And that's pretty much all most of them care about. They're not even thinking much about their friends or extended family, much less you and your business.

Now, none of this is to say that you can't encourage clients to spread the word about you also.  A captivating e-newsletter (free registration required) is one way to do this—especially one that appeals to women (women are much more likely to forward articles and information to their friends and relatives if they think there's value there). 

Telling clients "not to keep you a secret" is another effective way to encourage word-of-mouth business development. But don't think that word of mouth can replace true referral marketing. Think of them as separate and distinct initiatives, and focus the bulk of your energy on the referral side, because that's where the biggest opportunity is.

If you're sitting back and expecting your business to grow by passive "word of mouth," you've got a long wait ahead.  Get proactive. Start building your business "by referral" instead, and take control of your own growth.

Referral Clinic: "My best clients are using me up!"

We're continuing to revisit some of the great questions we received during our Referral Clinic and Blogathon in May and June.

Today's question comes from Carol, a wirehouse advisor in Englewood, CO, and will be answered by Katherine Vessenes, JD, CFP®, RFC. Katherine is president of Vestment Advisors and the country's leading authority on building a multimillion-dollar practice.

Carol asks: My ideal client has said I have been spectacularly successful in getting them to consolidate, assess and plan. Our investments have done very well. My problem is they believe if I have fewer clients, I will have more time to attend to them—and they have inquiries nearly every month which require research. I need to tell them I will not BE IN the business if I do not service more clients in the $3M range-just like them. How do I say they are using me up, which is short-term helpful to them, but long term means they will be with a different advisor?

Katherine Vessenes replies: Carol, I have two thoughts about your dilemma.

First, you might not be feeling so burned out if you felt like you were getting compensated for your time. Many years ago I learned an important lesson while practicing law and trying to keep the difficult clients happy: I would just raise my fees until I fell in love with them again. Consider using your RIA to charge fees or raise them for the level of service you are providing.

Second—if that doesn't work, then go to plan B: I would invite them to be part of your informal client advisory board. (Although this technique will work with just this client, it would be better in a small group of similar clients.)

Call them and tell them you would like to invite them to a dinner party and get their feedback on a couple of things because you really value their advice and are seeking some ideas about your business.

Start the meeting off by describing your ideal client. Then get the discussion going by asking the clients what they think the ideal client would like about your current level of service, and what they think you should change. Take copious notes, of course. Then ask them for suggestions on how to get more referrals to this group.  Good ways to phrase this are: if you were me, how would you approach this group? Can you give me some specific suggestions? If you are really bold, you might say: some of my clients have been hesitant to give me referrals even though they really like my services. What am I doing wrong?

Two things should happen after this meeting: you should have a great marketing plan to your ideal client, and your existing clients should be much more motivated to give you referrals.

Good luck and let me know how it works out for you.

Got questions or thoughts about today's challenge or the response? Post a comment!

How a $300 million advisor used referrals to build a niche business

Horsesmouth editor Nicole Coulter published a great case study today about Dominic Musso, a now-retired wirehouse advisor who built a $300 million practice in a targeted niche, all through referral. 

In a nutshell, here's the approach that Musso used:

Tell the niche members about your plan to serve other members of the niche and ask for their opinion on reaching out to that group. "Ask for help formulating a round-table agenda that would be attractive to other members of the niche," [business coach David] Leo says. "You want to go into a round-table meeting knowing some of the concerns of the group."

Musso, who attracted more than 800 oil industry clients over a 15-year period, concurs: "Take one person or couple in the niche. Take them out to dinner and learn everything about them. Identify issues beyond investments that could pose problems for them," he says. "When you focus on knowing your client, and identifying their issues-if you do that with one couple, that couple can eventually take you to 12 other people. The more you satisfy them by making them happy and demonstrating your interest in their welfare, and teaching them what they need to know about their life, the numbers get bigger and bigger."

The article goes into much more explicit detail about the "how" behind this prospecting-by-introduction approach and considers how it could work for a less experienced advisor struggling to break into a new niche. 

You can read the entire case study (free registration required) here:

Case Study: How to Crack Hard-to-Enter Niche Markets

Don't let self-limiting thoughts wreck your referrals

Gail, a regional advisor from Texas, wrote in to tell us that even after 20 years in the business and despite being a big producer, she still finds that asking for referrals is her greatest business development challenge.  She says she's concerned that "my clients will wonder why I'm asking at this point in my career."

We all worry from time to time (some of us more often than others) that people are thinking negatively or critically about us.  And certainly, it's good to be aware of how others might perceive us, to ensure that we don't do anything truly foolish or destructive.  But most of the time, we're projecting critical thoughts onto others, thoughts that are exaggerated or just plain fiction.  And those thoughts hold us back in unhealthy ways.

This is a common problem with advisors where referrals are concerned, and it's the problem Gail is having. She's got this idea that there's something inappropriate about a successful advisor needing to generate new business, and she's projecting that idea onto her clients.  It's problematic enough that the idea itself is flawed... but attributing it to clients makes it doubly dangerous.

Whenever we make an assumption about what other people are thinking or feeling, we should stop and examine it objectively.  (You'll find this works especially well with spouses!) Often, when we expose our assumptions to air and light, we're able to see their weaknesses and strip them of their power. 

So let's examine Gail's assumption.  Think of some high-end, successful industry icons.  Bill Gates and Microsoft, perhaps. Saks Fifth Avenue.  Mercedes.   When you see an ad for one of their products or services, do you think to yourself, "Wow, I can't believe they're still trying to get new customers?! I mean, they're so successful, and they've been around for so long..."

Of course not. 

Or let's look at it another way.  Do you assume your attorney or your accountant will never need another client again? Or if you needed back surgery and called the office of the most brilliant and sought-after orthopedic surgeon in your state to get a consultation, would you expect the receptionist to tell you to take a hike because the doctor is just too successful to take on any new patients? 

You see where I'm going here.  99.9% of clients are neither surprised nor concerned that their advisor is interested in or willing to accept new clients.  Most clients probably don't give much thought to their advisor's other client relationships or business development situation at all. Why should they? It's not their job, just as it isn't your job to wonder whether your dentist's practice is thriving or not.  But to the extent that they do give it any thought, your desire to take on new clients has no bearing whatsoever on your quality or professionalism. 

In fact, if you ask the right way, you can actually reinforce your exclusivity and make your clients feel like members of a small and elite club.  This is a secondary issue for Gail, who says, "I especially want to emphasize that I'm only looking for million-plus dollar accounts without sounding snobby."  She can play that up in the way she phrases her referral discussions.

If Gail uses network mapping to pre-identify prospects or prospect types in her clients' circles who are likely to be qualified to do business with her, she can ask for introductions to those people in a way that reinforces just how successful she is.  "John, I know you're on the board of the Houston Advertising Federation. I believe Kim Phillips is also on the board?  She's one of a select group of ad execs in the area whom I've been focused on meeting over the past few years. What would you think about the three of us having lunch sometime next month, on me?" 

Can you see how this kind of exchange would actually reinforce both John's and Gail's importance and elite standing?

Don't let self-limiting thinking (free registration required) dampen your success. Anytime you find yourself concerned that something you do or say has made or is going to make a bad impression on others, stop. Recognize that you've made an assumption. Examine it.  Maybe it's valid—but more likely, you'll find that it's both without merit and counterproductive. 

The ABCs of Automatic Referrals: H is for Honor

One of the biggest misconceptions I hear from advisors is the idea that asking for referrals will ruin their reputation or destroy their professional image--that it is somehow dishonorable.  Here's what a few advisors wrote in our recent call for referral challenges:

"I've been turned off in the past when people have asked me for referrals and sure don't want to come across that way to others. That's mainly why I don't specifically ask for referrals. How can I ask for referrals and at the same time not be pushy or come across as desperate/non-professional? " Andy, Independent advisor, Dallas, Texas

"It's very difficult to ask my best clients for referrals as I do not want to sound strapped for business. How can I phrase a referral request that sounds professional?"  B.F., regional advisor, Philadelphia, Pennsylvania

"I have been in the business for many years. I recently identified seven clients that I would like to clone. We have a great relationship and I would like their help. How can I ask them for referrals without sounding like a beggar or a pushy salesperson?"  William, independent advisor, Minneapolis, Minnesota

In fact, it's not the act of asking that causes people to sound desperate or unprofessional—it's the WAY they ask. 

If you drop misty-eyed to your knees in front of your client, clutch his hand and plead that you'll be bankrupt within 24 hours if he doesn't cough up some referrals, then yes, you may leave a bad impression.

But getting back to reality, if you position your requests the way you should anyway (for general effectiveness), you will preserve honor and then some.  Because you're going to position yourself not as a desperate salesperson, but as the capable expert you are, someone who has helped your client and recognizes an opportunity to help someone else the client knows.  "Wow, it sounds from what you've said like your brother may not be getting the tax protection he needs.  I've helped a number of clients with this kind of problem. Shall we have lunch sometime, the three of us?  I think I can carve out some time next week..."

Or, you can position yourself as a prominent member of the community who would like to meet another prominent community member whom your client knows.  "You know, Ruth, I've always wanted to meet Roxanne.  She's on the symphony board, and I'm on the museum board, and I've always thought it might make sense for our two groups to put on a fundraiser together.  Do you suppose you could introduce us?"

You can even ask clients for help outright, as in William's question above, while preserving honor and professionalism.  Imagine you've just had a new house built by the best contractor in town, and he comes to you and says, "Mr. Smith, I've built houses for some of the top businesspeople in town, but you're the first financial advisor I've worked for, and that's actually a market I've been wanting to cultivate. Can I take you out for a round of golf and lunch and pick your brain about the best way to reach other advisors?" 

That's not a guy who's desperate for clients. That's a successful businessman who is curious to learn about a new market and sees you as the expert.  In fact, don't you feel a bit flattered that he wants your advice?  Wouldn't you be happy to help (assuming of course that you're pleased with his work on your new home)?

But here's the real secret to preserving honor when asking for referrals: you have to position yourself this way in your own mind before you can do it with clients.  Believe it: you ARE a capable professional and an expert who helps others.  You ARE a prominent member of the community who deserves to meet other important people.  Asking for advice and counsel doesn't diminish you or make you look unprofessional--to the contrary, it helps you look smart and open-minded and it makes other people feel good!

If you're finding any of this difficult, it would be a good idea to work on your professional self-image--and a good place to start is to take a step back and look at yourself as your best clients see you (or, if you have no clients yet, as they WILL see you someday).  The "What I Do for my Clients" worksheet in the Automatic Referrals report may help. 

If you still can't honestly see yourself in a positive light when you look through your clients' eyes, you may need to rethink the way you do business.

How do I use my newsletter to get more referrals?

Bruce, an advisor with Wachovia, recently sent in this question:

I write a quarterly newsletter that I send to clients and prospects. I have been writing it for 15 years and get frequent compliments.  I use it to ask for referrals in the following manner.  At the end of a review meeting, I ask people what they think of the newsletter. The response is always positive. I then ask, "Can you think of anyone who (I describe my target market) you think would benefit from receiving it?  One or more names almost always results. The catch is, I frequently get "I'll ask them if they would like to get it." Obviously, nothing ever results.  Advice please.

I suggested to Bruce that he tweak his script along these lines:

"We are preparing our next newsletter mailing, and I wonder if there are any other [appropriate target market] you think we should include."

Another way to say it would be:

"I wonder if there are any other [appropriate target market] who you think might find our [subject matter] commentary interesting."   

He might even consider letting the client in on what the focus of his next issue will be:

"We’re going to be including a special column on "8 Ways to Ensure Your Business Keeps Thriving After You Retire" in our upcoming newsletter.  Which other car dealership owners in your association do you think [or "do you know any other car dealership owners who"] might be interested in that topic?"

Obviously, you can mold this approach to fit your own newsletter, style, and target markets. The point is to add a sense of timeliness to your request and imply a need for the client to supply the name and address now.

You’re also positioning the request in terms of sending one document to the referral, not adding them to a mailing list.  For most people, th