Making referrals work

By Mark Noble | May 7, 2007 | Last updated on May 7, 2007
4 min read

(May 2007) Referrals are the gold standard when it comes to finding new clients, but most advisors are missing the mark — trust is paramount, and advisors have a long way to go before they earn it.

This is the message Dan Richards, president of Strategic Imperatives, brought to those gathered at the Mackenzie University road shows last month. “Building trust is not everything; it’s the only thing.”

For some advisors, like Rob Kelland, the process of building this trust and gaining referrals is a natural extension of good service. He and his team don’t ask for referrals.

“We’re very reactive with referrals,” says the London, Ontario-based Scotia McLeod director. “Servicing well leads to referrals, and all of our business via referrals exists because we service well.”

Kelland stresses that building trust is not simply a matter of being competent or just good at what you do. Advisors need to be exceptional in the service they offer in order to build the necessary trust that leads to unsolicited referrals.

“You always have to try harder than the next person,” he says. “The reason the Four Seasons Hotel is a premier hotel is because of the service they offer. You’re paying for the service you’re getting. It’s the attention you get in every detail.”

Kelland says his team always sweats the small stuff. They make sure that phone calls and e-mails are returned as soon as possible. He sends out newsletters to all his clients and makes a detailed summary after each meeting with prospects. He also sends follow-up letters to prospects and thank-you notes to referees — all just a few simple examples of the details that can be added to improve service.

Some clients, however, are not going to refer you, no matter how good an advisor you are. “Some just have low referral DNA,” says Richards. As well, he points out that many advisors are reluctant to actively seek referrals from clients, often because they don’t want their clients to feel pressured, and even those who do ask tend to have poor success rates.

To help, he recommends three ways to seek referrals:

Identification: Target prospects in your client’s social networks. Asking to meet prospects is the first step, but asking is only part of the battle. How an advisor asks for potential prospects can have a significant impact on success rates.

Richards used to advocate a “low-pressure” approach, where the advisor asked clients if they are happy with the service. If they answered yes, the advisor then asked if they knew anybody else who would be interested in his or her services. This approach reduced the pressure of trying to get referrals, but Richards says he now realizes the method is too passive.

“The indirect approach is effective in not creating stress, but all too often it ends up with no result,” he says. This is because clients are let off the hook from having to give an affirmative answer, so they will likely say, “I don’t know” or “I will see what I can do,” but since there is no specific commitment, very little comes of it.

Richards now recommends asking a specific close-ended question. For example, ask clients about someone they have mentioned to you in the past, such as a business partner or family member.

Rather than asking an indirect question, try something like this: “Over the past five years that we’ve worked together, you’ve often mentioned your partners Pat and Joan. Is either of them someone I should be talking to?”

This type of question will not put undue pressure on a client like an outright request for a referral, but your client will be required to answer specifically. The client may still say no, but if he or she says yes, you have a targeted prospect to follow up with.

Introduction: Always try to put a face to a name. Richards says getting introductions is a successful tactic used by high-net-worth advisors he knows.

One advisor in particular starts by developing a list of target high-net-worth prospects and their social networks. This might entail asking existing clients to social functions, dinners, or golf games. The introduction is a crucial step toward attaining the most important referral feature, the endorsement.

Endorsement: Getting an endorsement is an extension of the trust you have developed with a client. The prospect has a positive pre-evaluation of your services, hopefully from a trusted source.

Even with an endorsement, Richards says, you have to go the extra mile to differentiate yourself from the competition. To start, 51% of prospects talk to more than one advisor before they choose, and the more lucrative a prospect is, the greater the chance that he or she has other suitors.

Even after the introduction and initial consultation, you should at the very least follow up and let prospects know they are important to your business.

If you do earn the referred prospect’s business, Richards suggests following up with a phone call one week after the purchase of services, calling after the financial statement arrives a month later, and scheduling a short meeting at the end of three months to help solidify the relationship, and perhaps earn more endorsements in the future.

Filed by Mark Noble,


Mark Noble