How to lose referrals

An advisor had an elderly client with a small portfolio that required little management. But the client would call the advisor incessantly, asking questions that had nothing to do with her investments, and sometimes just to chat.

“She was making him crazy,” says Stephen Wershing, president of The Client Driven Practice in Rochester, NY.

A few months later, when a colleague asked the advisor whether the client was still bothering him, he said, “No. I found a way around it. Every time she called, I’d ask for a referral.”

Wershing uses the example, provided by Bill Good Marketing, to teach advisors about prospecting—unless you want to lose clients, don’t pester them for leads.

Read: Survival tips for new advisors

Jason Stalker has never had to ask for a referral in the 14 years since launching Stalker Financial Group in Winnipeg. He serves about 1,200 households, and clients range from those with $50 million in assets to some who contribute $25 per month to RRSPs.

“I got my first million-dollar clients within a year of setting up my company,” he says.

It started at a golf tournament, where he met Kathryn, who was handing out gift certificates for free registered massage therapy.

Read: Devising the right prospecting strategy

Prospecting tip

The word “referral” puts people on the spot. So don’t use it, says Bryce Sanders, president of Perceptive Business Solutions.

Instead, share anonymous success stories. When a client asks “How’s business?,” tell him how you helped someone, and use detail. This keeps you top of mind, and the next time that client’s friend has a similar problem he’ll refer you.

For instance, say, “I had this client who worked at the Port Authority bus terminal in New York, and she hated her job. She came in for a portfolio review. I looked over her spending and realized it didn’t change year-to-year. I put together a budget and said if you can live within these guidelines, and we move your money around, you’d never have to work again. Two weeks later, she quit and got to do what she loves—working on community garden projects.”

“People were being crass; taking the gift certificates and throwing them out in front of her,” he recalls. “I’d set up my own company and knew what it was like to be in a start-up, so I felt I should support her.”

He became her client, and at the first appointment she asked what Stalker did for a living. That led to her setting up a $25-per-month RRSP.

During subsequent meetings, Kathryn, a new mother, asked about RESPs and non-registered versus registered funds. Finally, she discussed Stalker’s suggestions with her father, George, who is well-versed in investments and tax.

Read: 8 great year-end tax tips

“I thought I should meet this fellow who was trying to get my little girl’s money,” says George. And meet they did. Stalker recalls George staring at him sternly during the first meeting. “I was actually starting to sweat because I was thinking, ‘This guy hates me.’ ”

Meanwhile, George says he just did what any concerned parent would’ve: “I asked a few questions, and stuck in my two cents occasionally.”

Stalker persevered. He stressed to George that the meeting was an open format, so he could ask anything.

“When we finally left the office,” says Kathryn, “Dad told me he felt Jason was a smart and honest guy—willing to do the work of finding options that suited me, not just sell anything, and I should go ahead and set up the funds.”

George also called the next day, telling Stalker he had $160,000 to invest but that he also wanted him to look at his pension plan. At the time, he was considering retirement and had a potential $850,000 to commute.

Stalker contacted a few accountants and lawyers to get their input. Then he called George and told him, “In order for me to take your pension plan, I need to earn you at least 5% for the first few years. I can’t guarantee that, so I suggest you stick with your plan.”

What to say

• “I work with women of wealth who are suddenly single and want to preserve their financial independence.”

  Clients will think of you if they have a friend who:

  • is getting a divorce;
  • complains she doesn’t know how to manage wealth.
• “I help small business owners structure and execute an effective exit strategy.”

  Clients will think of you if they have a friend who is:

  • thinking of succession;
  • worried about whether he’ll get the full value for his company if he sells.

Source: Julie Littlechild, CEO and founder of Advisor Impact

But George, who’d also sought advice from three banks and a credit union, appreciated Stalker’s honesty.

“Jason had the most down-to-earth and common-sense approach, and he was willing to listen to my input. A couple of the banks were inflexible. One of them was so busy telling me how much money they could make for me they never stopped to see if it made sense. The credit union was more flexible, but limited in [its] options.”

He adds, “Jason did not promise me the moon, but was realistic and allowed me to make a number of my own choices, such as seeking tax advantages of capital gains and dividends over interest-bearing investments.”

Read: Show clients why it’s important to plan

And George was pleased Stalker spent time getting to know him and his wife—their plans for the future, and how they would impact their finances.

“After the initial investment period, Jason meets with us regularly,” says George. “And he also speaks to both of us, not relegating my wife to a lesser status.”

Since then, the entire family has become Stalker’s clients, including Kathryn’s brother and his wife, as well as the brother’s mother- and father-in-law, who reside in Quebec and have pension plans in excess of $1 million.

In fact, the mother-in-law called Stalker and didn’t even ask questions. She simply wanted him to send the paperwork so she could hand over the pensions.

But Stalker told her he couldn’t because he wasn’t licensed in Quebec, so she’d have to come to him. She was adamant, and the next time the in-laws visited Winnipeg, they met Stalker and processed the paperwork.

Referral myths

Don’t buy into these false mantras.

01 Asking for referrals generates referrals.

Wrong. Most advisors think this works, but only 2% to 4% of their clients are referring, says Julie Littlechild, CEO and founder of Advisor Impact in Toronto.

Like Stalker, Michael Pottruff, financial planner at FundEX Investments in Toronto, is another advisor who doesn’t go this route. “I feel uncomfortable asking for referrals,” he says. “Instead, I try to talk to clients on a regular basis, and use every phone call to learn something about them.”

Read: U.S. advisors want more referrals in 2014

He’ll ask about a client’s family, and if he learns the daughter just turned five, he’ll suggest setting up an RESP.

Yafa Sakkejha, general manager at Beneplan Co-operative in Toronto, agrees this method works. For instance, one of her employees got a call from a client who had a daughter, who wasn’t able to fill a prescription.

The employee then called the company to try and resolve the problem, but learned it was a system issue that would take a few days. The employee offered to pay for it herself, knowing she would get reimbursed later.

“The client was impressed and the story spread like wildfire,” says Sakkejha, adding they continue to get referrals as a result.

Read: Diversify your network

And the numbers back this theory. Littlechild notes almost half of clients who referred an advisor did so because of great service.

How to be niche

Contact one client and ask to talk to her about her experience working with you.

Ask:

• Why did you select me as your advisor?
• If someone asked you to describe how we had helped you, what would you say?
• How do you think the work we have done together will impact your financial future? What will be different?
• What was the trigger that made you decide to get financial advice [or change advisors]? What problem did you want me to solve?

Source: Julie Littlechild, CEO and founder of Advisor Impact

02 Clients refer to help the advisor.

No. In fact, 57% of clients say they refer to help friends who had financial problems, says Littlechild.

“Humans already have a built-in referral mechanism because they want to feel good by helping someone in need,” she says. “All advisors have to do is something to trigger that.”

Littlechild suggests telling stories that clearly explain the problems they’ve solved (see “Prospecting tip” ). Clients will remember these anecdotes when talking to friends .

Another way to get referrals is to define your niche, which also makes you memorable (see “How to be niche,” right).

“Many advisors think clients come to them for their investment process,” says Wershing. “This isn’t true. I’ve had clients tell me they don’t care about that and want advisors to stop talking about it.” Instead, clients come to advisors to get a specific solution to a problem they have—for instance, a client’s mother passes away and he doesn’t know how to handle the estate. The help at the time of need makes the advisor memorable.

But, when telling clients about your niche, don’t talk like an advisor (see “Conversation starters”). Avoid phrases like, “I have lots of experience,” or “I offer great customer service and investment returns.” Those words won’t set you apart, says Wershing.

Instead, try talking about how you’re different. For instance, you offer tax tips for small business owners in the retail sector.

If you follow these steps, “then the next time [the client’s] at the golf club and a buddy tells him of a problem he has, he’ll remember what you do and how you help,” he says.

Another way to make your words stick is by drawing on a client’s creativity. While you shouldn’t ask for referrals, you can ask what clients find valuable about your service, and what else they’d like you to do that you’re not doing now. For instance, Wershing suggests saying, “Our advisory board has told us we do [X] really well. The type of clients who need that are [Z]. But now we have a challenge. We need to get the word out. So, if you were in my position, what would you do first?”

If a client pushes back or says he doesn’t know, then simply ask him to drop you an email if he thinks of anything because you would appreciate his guidance.

Client speaks

I’m not going to refer anyone to a business if I don’t get evidence that the business knows how to get the job done. I’m also not going to refer anyone if the staff aren’t helpful and honest about what they can and can’t offer.”

Kathryn (last name withheld)

Suzanne Sharma is the associate editor of Advisor Group.