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The Art Of The Referral

The Art Of The Referral

Asking for a referral is often an awkward process, but it doesn't have to be. Here are a few strategies to make it work.

Roya Moltaji always knew she needed a way to get more than a steady trickle of referrals coming in. But during the first seven years of her career as a financial planner for Met Life, the Bloomington, Minn., advisor just didn't have a clue how to go about it. Who should she ask? When should she approach them? How should she phrase it? “I've struggled for years with what to do,” says Moltaji, who manages $16 million in client assets.

Then, a few months ago, she started working with a coach and embarked on an entirely new strategy — developing standard wording for broaching the topic of referrals and standard methods for following up. And it worked. In March and April, she received 46 referrals, mostly from existing clients, compared to just six for the two months before.

Like Moltaji, everyone wants to win new business through referrals from clients and other associates. And why not? It's considerably more efficient than, say, running seminars or dialing for dollars and it produces infinitely “warmer” prospects. What's more, it's the recommended method for finding high net-worth clients. Yet for many, if not most, advisors, asking for a referral is awkward at best, especially if the advisor wants his clients to see him as a trusted helper, not a mere huckster. As a result, advisors tend to shoot from the hip when looking for referrals — or simply choose not to ask at all.

It doesn't have to be that way. Asking for referrals — and getting them — can be as natural as any other part of your business m.o. But it can't be an afterthought. It requires a well thought out, soup-to-nuts strategy, one that makes you — and your clients — more comfortable with the process.

First, of course, you have to decide whom to approach. Generally, it's best to start with your A clients, especially the 20 to 25 at the top of the list, who most closely approximate your ideal client and are most likely to lead you to the type of prospect you want to target.

But that doesn't mean you should only ask for referrals from clients in your sweet spot. Eric Brotman, who heads Brotman Financial Group in Timonium, Md., for example, says he's often received referrals who weren't right for him, but would then refer these individuals to another advisor he knew who was more suitable. It's always paid off. “We've gotten more mileage from that than anything else,” says Brotman, who has $75 million in assets. “The most important thing is that people are talking about us when we're not in the room.”

You also have to decide when to bring up your request for referrals. In some cases, you might want to take your clients out to a nice meal and use the time to discuss the topic. Or, you can include it in your regular client meeting agenda. Mary Sterk, president of Sterk Financial Services, a Dakota Dunes, SD, firm with $110 million in assets, tends to make the question a part of her annual review for established clients with whom she has a track record. Generally, however, it's best not to bring up the topic more than once or twice a year.

Of course, the mechanics of the asking are the biggest stumbling block. That's especially difficult for those who have worked hard to develop collegial relationships with clients. For example, during her first four years running a practice, Sterk seldom asked for referrals. “I thought I sounded too much like a used car salesman,” she says. “I work hard to be on the same side of the table as my clients, so it seemed counter-productive.”

Then, about two years ago, Sterk started taking a two-pronged approach. First, she'd bring up a specific example of a piece of good advice she gave the client and then she'd ask an open-ended question about which aspects of the planning process the individual found most valuable. After that, she says, “We segued into a conversation about people they know who might appreciate the same level of value.” Now, according to Sterk, she gets three high-quality referrals a month.

The other tricky part is encouraging clients to offer actual names of individuals. That's because, even when clients are responsive to your request, they often draw a blank when it comes to zeroing in on real leads. “Most advisors simply are too vague,” says Matt Anderson, an Evanston, Ill.-based coach who specializes in helping advisors develop referral strategies, and who coached both Moltaji and Sterk.

One solution is to assemble a list of names of people the client knows, and then to ask the client whether any of these individuals might be interested in your services. You can sometimes get that information simply by being alert during your conversations for mentions of names of colleagues, acquaintances and family friends, and keeping a record of them. For her part, Sterk takes a few approaches. First, she asks clients to fill out a client profile, with questions about hobbies, interests, and groups in which they participate. Then she refers to those organizations and pastimes when she asks for names. But she also looks for occasions where a particular investment problem the client is having could also apply to other family members or colleagues. For example, Sterk recently helped a client with an unusual provision in his 401(k) that allowed for certain distributions only after age 59 ½. She asked the man whether anyone he worked with was in the same situation and might like to talk to her. The upshot: He gave her a list of ten people, four of whom became clients for a total of about $1 million in assets.

Another approach is to use LinkedIn. Take Jerry David, who runs Precient Financial Solutions, part of Northwestern Mutual's wealth management group in Milwaukee, and his wife, Peggy, who is in charge of marketing. She looks at clients' LinkedIn profiles for names and titles of their associates. “That way, we can identify ahead of time if the person is the type of client we're looking for,” says Peggy. In addition, she gets an RSS feed with information about her clients' employers, looking for relevant news. Then, if, say, she sees a story about someone heading up a new division, her husband can ask whether the client is willing to make an introduction to that person. At other times, David will provide his clients with a profile of his ideal prospect and, at the bottom of the document, include lists of appropriate friends and associates whom the individual knows. This approach generates about 15 to 20 referrals a month.

Once you have names of individuals to contact, don't leave it at that. Ask clients about the best way for you to contact these individuals, encouraging them to pave the way, and, if it feels right, request suggestions for how to phrase the conversation. Also, pinpoint a good time to get back to your clients, to find out if they've followed through. And don't be surprised if they've forgotten about it. “They'll say, it slipped my mind, give me a week,” says Moltiji. Generally, however, after your first reminder, they'll make the call, clearing the way for you to take the next step. Be careful at this stage of the game not to be too pushy, though, or you could turn some of your clients off.

An advisory board is another approach to getting referrals from your clients. About a year ago, Brotman formed an advisory board with his 20 top clients, and the group meets twice a year over dinner to talk about new programs, marketing efforts and other issues. While members are certainly not required to offer referrals, they usually do. According to Brotman, he received six referrals in January, four from board members.

For best effect, include the rest of the staff in your efforts. That means teaching your assistants about your strategy and keeping them informed about important changes in clients' lives. Moltaji and her assistant also incorporate specific referral strategy steps into her schedule for each week. Since Moltaji always jots down names of friends, co-workers and others that come up during client meetings, each file includes plenty of promising names to mine. Together she and her assistant look though each file to see who is in there and how best to proceed.

Another time-worn strategy is to tap your carefully cultivated network of attorneys, accountants and other professionals for referrals. But that's a slower process. It can take a year or longer to develop such relationships and you need to be at it constantly. Sterk, who works with a “small handful” of accountants and lawyers, tries to meet every quarter with at least one new prospect. And Brotman makes a list of 250 people every year with whom “I want to have coffee with and stay in front of,” he says. “I try never to eat alone.” That includes lawyers and accountants, as well as businesspeople he meets at networking events, like a Chamber of Commerce group meeting or conference. Some of the people on his list are professionals with whom he has an existing relationship that needs nurturing; others are new. According to Brotman, he usually gets about 25 referrals from that list of 250 professionals in any one year, and perhaps 12 end up becoming clients.

The best way to kick off relationships with attorneys, accountants and other professionals is by referring business to them. But you also need to be methodical about eliminating people who don't reciprocate. If after a year-and-a-half one of them hasn't sent a referral back, Sterk cuts off the relationship. Brotman does the same. “I want to make sure it's a two-way street,” he says. “If folks don't prove to be a ripe source of opportunities after a while, they're off the list.”

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