Know Your Ideal Client Profile to Screen Referrals

Nobody's apt to look a gift horse in the mouth, but the truth is that just because you receive a referral doesn't mean you should take it on impulse. Other than failing to meet your account minimum, there are other factors that should trigger a pass. Take the advice of Dallas based advisor Woody Young and avoid "taking what you get instead of getting what you want."

It follows that in order to get what you want, you need to know whatyou want. Take the time to sit down and determine what type of client you most enjoy working with and have found success with in the past.

Consider these questions for starters:

• Risk. Do you prefer working with conservative clients or risk-takers?

• Arm's length. Do you prefer to maintain a professional detachment with your clients? Or do you like having an informal, friendly relationship?

• Communication. Do you prefer a formal or informal style? E-mail or formal written proposals?

• Gender. Do you have a preference in working with women or men?

• Age. Are you more comfortable with older or younger clients?

• Focused/broad. Do you specialize in a niche or are you a general practitioner?

• Fast/slow decision-making. Do you like working with people who make investment decisions quickly? Or people who take their time?

• Educate/collaborate. Do you like to teach? Or do you prefer savvy investors who discuss decisions with you?

When you've defined what kind of client you're most compatible with, you can easily see what kind of referral you should pursue, which you should contemplate, and which you're better off passing on. This way, you'll start getting the kind of clients you want, not just those you can get.

While the above questions are a good start, there's more to establishing an Ideal Client Profile, and if you're curious about learning more about the topic, you can find additional information in these Horsesmouth articles (free registration required):
  
Attract Business With an Ideal Client Profile
http://www.horsesmouth.com/linkpo/83744.htm
Knowing exactly who you serve best leads to more effective marketing and referrals--and more business. Review these examples before writing your own ideal client profile.
 
7 Steps to Cloning Your Best Clients
http://www.horsesmouth.com/linkpo/79385.htm
Your dream clients might be just a phone call away. Here's how to replicate your best clients.
 
Identify Your Best Clients
http://www.horsesmouth.com/linkpo/68983.htm
Business coach Steve Sanduski shows you how to segment your book so you can identify your best clients--and find more just like them.

Making the Switch to Target Marketing

Newly independent advisor Tom H. of San Luis Obispo, CA wanted to jumpstart his new business by concentrating on referrals and using target marketing to channel his message. "It has occurred to me that I don't have a defined target market," he wrote. "Yes, I have a book of business, and it includes many retired individuals as well as young business owners and random individuals."

But Tom had doubts about the approach, specifically a fear about alienating prospects with a specialized marketing message that didn't fit them: "At the risk of not maintaining a target market, I don't want to leave out possible clients.  Is this a sound approach?"

He addressed his concern to Bob David, Horsesmouth Director of Advisor programs and leader of the Automatic Referrals Jumpstart Program. Here was Bob's response:

"I understand how it can be a bit overwhelming to try to tackle too many things at once, especially after going independent. Having grown up in a small University town myself, I know there are some unique challenges. Here are a few thoughts:

• Keep in mind that having a target market does not mean abandoning the clients you have that have been loyal to you as you've changed firms. This would be a de-motivator for you for obvious reasons. It just means that when it comes to your pro-active efforts, you will begin focusing on the needs of your "ideal client" or "target market."
• It is very important to identify your "ideal client." It can be tough, but keep drilling down. Remember that success leaves clues, so start with a hard look at those retirees and inheritors. What do they have in common? What did they do before they retired? Are they affiliated with the University? Or the government? What is the demographic profile—are they men or women? What age? What are their affiliations, passions, hobbies, etc..?
• Consider going one step further and doing a "SWOT" analysis: S—What are your relative Strengths in your market? W—What are your relative Weaknesses? O—What are the Opportunities perhaps overlooked by your competition? T—What are the Threats to your practice? (Could be aging clients, lack of a consistent advisory process, service quality, etc...)
• Consider derivatives of the more obvious categories and maybe move beyond your borders. For example, "Family Owned Funeral Home Operators" throughout CA or retired college professors or retired football coaches, etc...

At first, target marketing can seem daunting, but if you do some digging like Bob suggests, in the end it's a rather natural extension.

For more on target marketing and SWOT analysis, see these Horsesmouth (free registration required) articles:

How to Pick a Lucrative Niche

Many advisors think that by keeping their options open to all potential business they won't miss an opportunity. But the opposite is true. A focused, rich niche can be far more effective. Here's how to develop a niche over the course of the year.

6 Rules to Guide Your SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats. In order for your marketing plan to work, you must honestly assess your practice in these four areas. If not, you risk failing in your efforts to grow your business.

Why Pruning Your Book Can Boost Referral Results

It may seem odd in a blog about referrals, but I'm going to spend a minute telling you why you should considering cutting people OUT of your book, and being choosier about who you accept as a client.

In his post "Grow Your Practice by Asking Clients to Leave" on The Non-Billable Hour blog, Matt Homann discusses a really interesting post on, of all things, a marketing blog for churches.  The gist is that in order to grow in a healthy way, churches not only need to be open to letting parishioners switch to a new church when they're not a good fit, they should actually be proactive about SUGGESTING that they leave.

Take a look and you'll see immediately how this applies to your business.  As Matt says, "Your practice is often far healthier if you stop serving clients you don't want  (and who are often unhappy with your service anyway)."  Not only does "pruning" your book free up more space for GOOD clients and lead to a happier, more fulfilling experience for you, it also leads to higher-quality referrals... because the clients you like are the ones most able to connect you with others just like them.  (This is especially true when you start to get into niche marketing.) 

Start examining your book and your client requirements today, and get on the road to greater efficiency, higher satisfaction for you and your clients, and more quality referrals. These resources can help (free registration required).

Pruning Your Book 101: Get Rid of Dead Wood
Got too many unproductive clients? This primer shows you how to reduce the size of your practice to release energy and increase your satisfaction.

Should You Throw Some Fish Back?
Being selective about the type of client you take on can be difficult, but critical to your continued success. Here's what FAs have to say about screening prospects in this week's advisor e-mailbox.

Give Your Book a Spring Cleaning
If you're a veteran advisor, find out what's lurking at the bottom of your client list. You may discover a gold mine or a junk heap—but at least you won't be in the dark.

How to Set an Account Minimum--And Stick to It
http://www.horsesmouth.com/linkpo/79321_18.htm
Don't wait until you have hundreds of small accounts to establish an asset minimum. Define your ideal client today, provide high-quality service, and achieve success on your own terms.

Want More Referrals? Get a Niche.

There is a long, long list of reasons that you should consider narrowing your focus and choosing one or more niche markets to serve. On just about every measure you can think of, from production and assets to pure satisfaction and enjoyment of the job, Horsesmouth's research has found that niche advisors are more successful than generalists.  But for our purposes, there is one especially compelling reason to "niche up": you're quite likely to get more referrals.

In their survey of more than 2,100 advisors, Horsesmouth asked the question, "Are you getting more referrals since you started working in your niche?"  Check out this chart.

   

It's hard to argue with those results.

Read The Advisor N-Factor, a Horsesmouth special report, and learn more about why niche marketing is so powerful and how you can start marketing to your perfect niche—and rev up your referral results along the way.

The Five-Minute Referral Secret

Here's the shortest great referral idea you'll ever get, courtesy of the Golden Practices blog:

"Find your five favorite clients.  Take them to dinner.  Don’t let them leave until they answer this question:  What can I do to get more clients like you?"

I know an advisor who started using this approach after going through the Automatic Referrals Jumpstart program.  Dennis words it a bit differently, but the idea is the same: "How do I find more of you?" 

He asked one of his favorite clients this question; she was delighted and complimented, and soon thereafter referred him to the man she was dating, who is the executive of a corporation.  Dennis got his accounts.

Now, this gets hard to follow, but next, she referred him to the son of her ex-husband, who is an executive at Microsoft, and his wife. Dennis got that account too.  Then the son's wife introduced him to her parents, who are a very wealthy retired doctor and mathematician.  He got that account too.  When he was telling me this story, he said, "This one million dollar account will be worth $20 million when it's done."

Can you afford NOT to try this great idea?  (Oh, and if you want to take it to the next level, consider a client advisory board (free registration required).

How Can I Get Clients to Refer Up Instead of Down?

L.H., an independent in Montana, emailed last week and asked:

"I get many referrals to lower quality prospects. How can I get 'referred up' rather than'referred down?'"

It's a great question. There are two pieces to the answer.

The best way to get referred to the type of clients you want is to take control of the process: by asking directly for introductions to specific people your clients know, rather than waiting for them to suggest names.  Automatic Referrals teaches a process called "network mapping" that helps you match the types of prospects you want with the people your clients know, and then ask for introductions to those people. 

This is the referral method that the most successful advisors use.  It gives you much more control over your referral flow, and also makes it much easier to make contact with and make a good impression on referred prospects.

However, the reality is that sometimes clients will provide unsolicited referrals, and you want those prospects to be qualified.  The best way to deal with this is to make sure that you are properly educating your clients about your business and the types of clients with whom you work. Don’t assume that clients know your areas of specialty, specialized services you may offer, account minimums, etc.  You can educate them in casual conversations, in marketing materials, in your newsletter, or by discussing it with some standard language during client reviews.   And, to the greatest extent possible, it's good to train clients to check in with you before making a referral.

Here’s one example of how you might phrase this, either in a meeting or in language you include in a client letter or newsletter:

"A number of my valued clients have been kind enough to ask if I am accepting new clients.  I am always grateful for your trust in recommending me to friends and family members.  At present, I am able to take on new clients in two specific areas: business owners who are seeking the opportunity to sell or transfer their business, and corporate executives who are within five years of retiring.  If you have someone in mind who may be looking for this type of financial advice, please call the office. If I am not the most appropriate choice to provide the help they need, I will always try to recommend another advisor who would be suitable."

On a related note, if you are going to turn away underqualified referrals (which is entirely appropriate and necessary from time to time), make it a point to identify one or more other advisors to whom you will feel comfortable referring those referrals—advisors who will appreciate their business, and provide them with quality service.

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!

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. 

How to Stop Getting Poor Referrals From Attorneys and CPAs

Welcome to Day 18 of our Referral Clinic and Blog-a-thon.  We asked advisors to send us their toughest referral challenges. Now we're featuring the 20 best, along with solutions from top referral experts and veteran financial advisors. 

Today's winning question comes from Chris M., an independent advisor from San Diego. Congrats, Chris!

Daryl Logullo, founder of Strategic Impact, will be answering Chris's question. Daryl helps advisors attract more clients using direct response, strategic alliances, and client referral strategies.

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?"

Daryl Logullo's answer: It sure becomes a lot easier when the referral source knows four specific, tangible items about you:

1. Precisely what your skill sets are (managed money, insurance planning, estate tax guidance, etc.). They need to be able to recite your core competencies as specifically as possible.
2. Whom you have previously done work for (showcase this via testimonials, case studies, etc.)
3. What reasonable results they can expect should they refer you.
4. What your communication process will be should they introduce you to a prospect or client.

If you tackle items one and two above, over time it becomes crystal clear in the referral source's mind who an ideal client is for you.

The problem is that most advisors have never done this. And they certainly don't do anything regularly that creates opportunity to discuss who "lives" inside their current business world. Trust becomes the byproduct.

If you take a look at the social psychology that influences trust and garners closure, trust means that the other person's intentions are open, honest, and in your own best interests. Trust leads to social influence, which means that I earn the ability through my own thought or action to easily persuade the other person—often when I'm not even trying.

I don't want to get into a long discussion about how to gain trust quickly. But at the core level, the other professional must have confidence in your skill set and that fact that you won't harm them.
Outgoing ways of accomplishing this kind of trust include providing pro-bono services or service on mutual charitable organizations; conducting joint focus group symposia; and other activities that involve the referral source in your "world."

There is a larger issue here under the surface that I want to address and be specific about. Let me do this in the context of attempting to forge a relationship with a CPA. (I don't want to digress from your original question here, but I need to sidebar to make the point.) It is what I call one of hundreds of hidden truths about a CPA and his/her world that often goes unspoken.

When I do occasional public speaking, I'm often called to elaborate on this truth. I know it to be true from the over 349 hours of private focus group work I have done interviewing CPAs for over ten years now.

Here it is: You and the CPA are often approaching your efforts from the opposite ends of the business-building spectrum.

You see, if a CPA increases his or her client or referral load, that doesn't necessarily mean he/she will make more money. In fact, CPAs often view this growth, or a newfound "referral alliance," simply as more work and more expense.

Why? Often because of a linear business situation. In other words, service one client; charge one client for hourly fees; collect fees on one client.

I don't have space here to go into tremendous detail on this, but many accounting professionals explain it using a common phrase they toss around: "relevant range." 

Essentially this means that the CPA's business has a certain overhead, and that overhead can service only so many clients. An obvious statement.  Often, in the CPA's mind, they'll begin to lose money at a certain point where they add additional clients.

"'How is that possible?" you ask?  It's because added overhead may be required for them to grow. Many CPAs have a linear business model, and they often view growth, as related to operational costs and more clientele, as a negative (even though, as you know, in essence it's really a positive).

So fo course, you position yourself to them by being trustworthy, competent, and intelligent. But go further, and empathize. Make sure they understand that you get the concept of their linear business challenges.

CPAs have told me that an advisor can earn much more respect and trust simply by understanding and relating to the CPA's business challenges than by playing fancy "dating games." That's why I honestly believe that if you embrace what I'm explaining, CPAs will begin to understand the type of work that you do, and for whom.

Oftentimes, that's the key to receiving highly qualified referrals that fit into your ideal client scheme. Then you will never find yourself in the uncomfortable position of having to explain to a professional that their referral is not ideal.

Got questions or thoughts about today's challenge or Daryl's response? Post a comment.

What to Do About Sub-Par Referrals?

Welcome to Day 10 of our Referral Clinic and Blog-a-thon.  We asked advisors to send us their toughest referral challenges. Now we're featuring the best, along with solutions from top referral experts and veteran financial advisors. 

Today's winning question comes from Edward K., a regional advisor from Atlanta. Thanks, Edward!

Top advisor Gregory D. Gardner, CFP will tackle Edward's question. Greg is president of Dallas-based The Gardner Group, a comprehensive wealth management firm specializing in high net worth investors. Gardner is also actively involved with his alma mater, Southern Methodist University, where he played football. He is the chairman of Planned Giving for SMU Athletics, and also serves on the university's Planned Giving Board.

Question: "I've always tried to paint a vivid picture when I tell my clients what kind of new clients I'm seeking. I'll even say a minimum asset size of $200,000. I still continue to get some referrals with accounts under $100k. How do I decline to work with these folks without creating ill will with the referring clients?"

Greg Gardner's answer: I went through a phase of being referred "downward" by some of my better clients. We were getting a lot of referrals, but they were introducing me to their debt-ridden children and administrative assistants. We were doing a lot of charity work, explaining how to get out of credit card debt, etc.

After re-reading Nick Murray's The New Financial Advisor, I remembered why it was so important to stick to my firm minimum. For every client I brought on under $400,000… the next one would have to be that much larger. That made me reiterate my value proposition with my very best clients. For every minute I'm dealing with someone with $50,000... I'm not dealing with you.

I have taken on several steps to help improve this situation. I've done a better job lately letting clients know who we're going to work with and who we're not. We reworked our brand image to make them understand they were referring people not just to me, but to a process and a company. I explain to them how many families I believe we can manage. 250 relationships is our magic number. I tell them not to worry, we still have room to grow. It puts them at ease. They don't want to be passed on to paraplanner for their investment questions.

Unfortunately, the downward referral still happens from time to time. One client referred me to one of his employees, a guy making $75,000 who had $35,000 in assets. Taking on that person didn't make sense. I still talked to the referral on phone for an hour.  I gave him some free advice, but I didn't take him on. I told my client I work with people like him, who have $1 million in net worth and $500,000 in investable assets.

That being said, you gotta take the children of your clients--regardless of account size.  I always meet with relatives of clients. From there, I usually spend 3-5 hours educating them on why they should NOT work with me until they are out of debt, investing faithfully in their 401(k), and some financial basics are established. This eliminates the operational headaches that smaller clients often bring us.

Next, I have brought on a junior wealth advisor to help with these smaller clients, if and when it makes sense. We also employ technology. Lower-tiered clients who come in via referral often report surprise at the high level of contact we provide--weekly e-mail market updates, a monthly electronic newsletter, and an annual face-to-face review. Based on their experiences at other firms, they didn't think we'd have time for them. Even clients with $10,000 invested with me are getting contacted by us frequently. They can opt out if they want to, but with technology, we can deliver that level of service at no additional cost or time commitment.

So, I have the technology and systems in place to handle the smaller accounts. However, just like you, I only have 168 hours in the week.

Got questions or thoughts about today's challenge or Greg's response? Post a comment.