To advisors, referrals are as precious as gold. Word of mouth, for most advisory firms, is by far the biggest source of new clients. So I was intrigued when I saw a new book about referrals. What could anyone say about this topic that might possibly be new? The answer: plenty.
Advisors are totally inept at gaining referrals. They employ outmoded techniques that undermine their credibility with their most important clients. They lack a systematic approach. So says Frank Maselli, a plain-spoken semi-retired financial services marketing expert.

Maselli managed 50 wholesalers at IXIS Asset Management, which is now Natixis Asset Management. There, he oversaw sales of some very well-known asset management firms among the company's affiliates-including Harris Associates (managed of the Oakmark Fund), Capital Growth Management (Ken Heebner's fund company) and Loomis, Sayles & Company-funds holding, in total, about $700 billion in assets. During his decade-long stint at IXIS, Maselli spearheaded Advisor Academy, a training program, focused on Merrill Lynch brokers, that was sponsored by the fund company to teach marketing and sales techniques to advisors.

At 51, Maselli was too young to completely retire. So he started a company that trains advisors in sales and marketing and he wrote a book-Referrals: The Professional Way-which teaches advisors a system for getting referrals. Here's what he says.  

GLUCK: You say that the way advisors ask clients for referrals is totally wrong. Why?

MASELLI: They're using the techniques that they've been taught, but the techniques make advisors look like sleazy salespeople. They're outdated techniques that were born in an era when advisors did not think of themselves as professionals. They're outdated techniques from a time when cold calling was the way advisors built their business. But because they're sane, sensitive human beings, most advisors do not use the old techniques to ask for referrals.

GLUCK: What are some of the techniques you're talking about?

MASELLI: One is the, "I need your help to grow my business" technique. Another is, "I earn my fee two ways, the fee you pay and the other by getting referrals from you."

GLUCK: What's the matter with that? You're being honest?

MASELLI: It makes you look like you need a handout. If you're trying to attract high-net-worth clients, that's the wrong message. It makes you look like you're desperate for business and your business is weak. It's the exact opposite message you want to send to a high-net-worth individual. You want to let them know your business is successful. You want to get a referral from a position of strength.

GLUCK: What you're asking advisors to do isn't easy. For advisors who are not very successful and who indeed need new business, they may not have the confidence to speak from a position of strength.