Referrals - Why You Don’t Get as Many as You Need


referralThere are way too may financial sales professionals relying on referrals to grow their business. The result is a lot of people struggling. Rather than get off their butt, invest some money in their business and do some marketing, they basically wait for the phone to ring. This is a great formula for a mediocre business which does not grow as it should.

We have many posts at our financial services marketing blog on how to market and grow your business the right way. But for the referrals you do want, let’s explain how you get them.

An intuitive but incorrect notion in the financial sales profession is that keeping your clients happy is the way to get referrals. While happy clients are a necessary condition to obtaining referrals, it is not a sufficient condition. An article in Harvard Business Review commented on clients switching among their suppliers:

"Customers’ expectation levels have risen dramatically. Today, 80% of customers who leave their previous [advisor] rate that [advisor] as "good." But you need to be better than good if you want repeat business, loyalty and referrals."

Sure, your clients need to be happy with your advice and service but that’s insufficient to have them send you the quantity of referrals you would like. Your clients do not spend their day thinking about how to help grow your business.

Of course, you will get an occasional referral from a happy client. But such referrals come to you in a haphazard, unsystematic way, a way you do not control. You cannot plan on them or bank of them. Does it make sense to have such an important aspect of your business, business development, based on a haphazard and uncontrollable act? Any financial adviser, an asset gatherer that seeks to grow his  business, should be adding assets by at least a million dollars a month. If your referrals generate that amount of new assets, then you must be a super individual. However,  I’ll guess that you receive a handful unsolicited referrals a year and the new assets are insignificant. Being a nice guy or gal and waiting for your phone to ring is not a formula for success: you need to be far more proactive.

Most financial advisers realize that this passive referral method does not work and many attempt another method for getting referrals. They don’t sit back and wait, they ask their clients. Now you’re on the right track if you intentionally and systematically ask. However, the way most advisors ask is unproductive. They use the “ambush method” which occurs as follows. In the middle of a conversation with a client, they verbally ambush him, “Say Bob, who do you know, someone like yourself that also wants increased safety from conservative investing?” Taken off guard and unprepared, your client begins to stammer, “uh, uh, gee whiz, I can’t think of anyone. Give me a couple of your cards and if I think of anyone, I will pass them out.”

This unstructured, unplanned, unsystematic method of obtaining referrals is rarely effective. Its ad hoc— 50 of the time you forget to ask and the other half of the time you get the babbling response from your client. If you want great results—in referrals, in portfolio performance, in your business—you must have a systematic process. In the next article, we will detail a structured referral process that works.


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