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 They're outdated techniques that were born in an era when advisors did not think of themselves as professionals. They're outdated techniques from a time when cold calling was the way advisors built their business.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.
MASELLI: They have to understand that strength does not come from the size of your book. Nor does it come from the amount of commissions you generate, or the amount of assets you manage. A strong advisor is one who believes in what he does and who understands the value he brings to people. Even if you just got into this business yesterday, you are in a profession now where you bring valued help to people who are desperate for your assistance and knowledge. Your strength comes from knowing that. It's a belief in yourself, your professional skills and in your ability and desire to care for your clients.
GLUCK: So, to ask for referrals from strength, you must measure your success not by the size of your business but by the quality of your client relationships.
MASELLI: Yes. If you take the time to pay attention to what your clients want, if you stay in touch with them on a regular basis, if you listen to them and you're there for them in the tough times, then you're a superstar. Being able to come from a position of strength in asking for referrals has nothing to do with how much you earn.
GLUCK: You're flipping the way advisors ask for referrals by making them feel good about asking for referrals.
MASELLI: That's exactly right. I want advisors to understand that they bring tremendous value and that they deserve referrals because of the help they provide. Now this is not easy. Frankly, there are others out there teaching clever phrases and gimmickry that may work for some advisors. But if you are working with top clients-and frankly, those are the ones that you want referrals from, multimillionaires who can gain you access to other people of significant wealth and referral sources-then the strength referral is the way to go.
GLUCK: So it's not about being a great technician.
MASELLI: I don't think any advisor today can survive with just a nice haircut and a shoe shine. You certainly must have some technical skill. But most of the technical help you need can be outsourced or done by other people at your firm. At the end of the day, this is a people business. We are money psychiatrists.
GLUCK: You want advisors to feel like it's almost an honor for clients to work with them. That's fundamental to being able to ask for referrals from a position of strength. Right?
MASELLI: Saying it's an "honor" is probably extreme. Any good advisor wants the client to feel somewhat respectful of the professional skill they bring. You want the client to feel that he is fortunate to be working with you and that he is in great hands.
GLUCK: And you can't just act like that without good reason. You actually have to deliver great service. Right?
MASELLI: This relates to your brand identity. You can't base your brand on empty words. You can say all day long, "I provide great service." But if your service really stinks, your brand identity goes out the window. You must be able to back up everything you say to the client. You should never build your brand or your relationships on things that you can't control, such as good portfolio performance. You can say, however, I'm going to create a great financial plan for you. You do control that. You can say I'm going to listen to you, I'm going to really care about you, I'm going to explain everything to you and not hide anything from you. Build your brand around things you control and around things that you are strongest at delivering.
GLUCK: And to figure out what you're strong at, you suggest conducting a personal inventory where you actually rate yourself.
MASELLI: The process of building a business starts with self-awareness. You have to be really brutally honest with yourself about your abilities. I suggest doing a Kolbe A Index assessment, which is the only validated instinct test. It measures what you are hard-wired to be great at, your innate talents.
GLUCK: So an advisor should base his brand on what he is great at doing.
MASELLI: Yes. Are you instinctively analytical? Are you going to do all the research? Or are you going to give me big picture ideas? Are you going to be strongest at following up with your clients? Are you going to be thorough? Or are you going to try to assign in-depth planning to another person in your firm? Do you want your brand to stress that you are innovative, creative, dynamic and have new ideas? Or are you going for reliability, consistency and proven strategies? The Kolbe test tells you which traits you are instinctively strong at and you should create a brand around.
GLUCK: You like niches. Which niches do you like best?
MASELLI: I find new industries every day that intrigue me and that are relatively unpenetrated by advisors. After writing a check to my landscaper, for instance, I discovered the stone industry. How many advisors know anything about the stone industry? Nobody knows how much money these people are making. And it's not from new construction. It's from renovations. So it's recession-resistant. But niche marketing means that you must learn about that area and then become an insider.
GLUCK: You say that specializing in business owners or doctors is not niche marketing.
MASELLI: It's too broad. Ophthalmologic surgeons, that's a niche. I really want you to become an expert in something specific. You don't need to focus your entire business on one niche or base your entire business on niche marketing-at least not initially. But if you can get in tight with a specific professional group or niche market, you can radically expand your referral capability in that niche. People will talk about you. When the anesthesiologists have a local convention and six guys in the meeting know your name-that can translate into referrals.
GLUCK: And you want an advisor to learn about stone quarries, and maybe try to write a financial column in "Stone Quarry Today."
MASELLI: Yes, in Stone World magazine. And I want him to attend the Stone World Annual Convention. You probably won't see another financial advisor with a booth at their annual convention. I love situations like that.
GLUCK: And you think advisors already have a lot of these hidden gems-excuse the pun-but fail to see them.
MASELLI: If an advisor looks at his client list, he may find three or four clients in the same industry. But without looking for it, he may never make that connection. And most advisors could never tell you about a client's stature in his industry. You may have a client who is revered in an industry, who writes articles, sits on boards, directs the future of the industry, and you may not even know it. That one person can be very influential in giving you numerous referrals.
GLUCK: How do you uncover those gems?
MASELLI: You have to analyze at your client base. If you have a client who is a doctor, what kind of doctor is he? Google your clients. Say you find out he is a nationally known orthopedic surgeon, specializing in knees. Take him to dinner and ask him about his specialty. He probably knows all of the other big-name knee surgeons in the country. That's an interesting niche.
GLUCK: How do you pick a niche?
MASELLI: Find an industry that interests you. You're going to have to learn quite a bit about the field. If you're not curious about it, then it's going to be more difficult for you. It's also good if you already have some clients in the industry, people you can ask about what's going on. Then you have the nucleus and can begin to build a network.
GLUCK: Contrary to the popular notion that you want to ask all of your clients for referrals, you say advisors should limit it to ten or 20 top clients.
MASELLI: Yes. By focusing your effort on just your top ten high-net-worth clients, you can reap rewards most efficiently. Wealthy people tend to socialize with other wealthy, successful people. Those top ten clients are not the people that you would ever approach for a referral by saying, "I need your help to grow my business."
GLUCK: What you're suggesting is a systematic approach.
MASELLI: Every advisor wants to get referrals. Very few advisors have a process for getting referrals. I recommend creating a referral intelligence file. Come up with 20 clients-just 20-that you would like referrals from over the next 12 months. Then, research each of those clients' worlds and develop a one-page dossier on each, identifying specifically who that client can refer to you. I never would go to a high-net-worth client and ask, "Who else do you know that might be interested in my services?" Do that homework before asking for a referral.
GLUCK: What are the kinds of things you're trying to uncover about referral sources?
MASELLI: You're looking for information about the client's personal world, family and interests-restaurants she goes to, country clubs, hobbies, kids' names, where her kids go to school, charitable activities. You're also looking for professional ties, such as suppliers, major clients, her stature in the industry and board memberships. The ultimate goal of the referral intelligence file is to identify specific relationships in that client's world.
GLUCK: So you want to do research on your client to find out if he's a corporate bigwig, sits on any boards and determine if he has a friend that you might want to make a client.
MASELLI: If your client sits on the board of a charity or publicly held company, you want to know all the other board members. Then you can say to the client, "I know you serve on the board over at XYZ. There's a guy on the board, his name is Bob Smith. Is there any chance you could engineer an introduction between the two of us?" You do all the homework in advance. High-net-worth people are busy. They don't have time to brainstorm when you ask for a referral and search their contacts to see who might be a good fit for your services. Your top clients are busy running their lives, running their businesses. So do the homework for the client.
GLUCK: But aren't you back to begging for a referral? And by naming someone the client knows, isn't it kind of stalker-like?
MASELLI: When you're face-to-face interacting on a client-to-advisor level, it's friendly and relaxed.
GLUCK: One insightful observation in your book is that clients face what you call "referral risk" whenever they recommend their advisor to a friend. What is referral risk?
MASELLI: Giving you a referral can be terrifying to high-net-worth clients or centers of influence, like accountants and attorneys. There's no upside for them. If you screw up something, your client may get a call asking why he gave his name out to you. If you lose money or give poor service to the person who was referred, your client could lose that friend. That's why when you ask for a referral from clients, many will give you answers like, "I don't really get involved with my friends' finances." Or, "I can't think of anyone right now." Basically, they're scared. To them, it's like writing a naked call option. High-net-worth clients and centers of influence have three levels of trust. The first level is when they give you a portion of their money to care for. The second level is when they give you all of their wealth to manage. And the third level is when they trust you with their friends, colleagues and critical relationships. To get referrals, you must get to the third level of trust.
GLUCK: You suggest ways to manage referral risk. What are those ways?
MASELLI: You must demonstrate that you're an intelligent professional when it comes to the emotional side of referrals by talking honestly about the risks. Don't pretend that, when a client gives you a referral, there's no risk to him. Explain to the client, "When you give me the name of your friend, there's danger in that for you. The danger is that if I screw up, your friend may resent you. So let me tell you how I handle referrals because I want you to be comfortable." Could this scare some people away? Yes. But if you don't talk about the risks, does that mean they go away? No. The risks are still there, and you're just hiding from them. By talking about the risks, you demonstrate that you're aware of them and your client will have more confidence and trust in you.
GLUCK: And you like advisors to provide details about how they manage referral risk.
MASELLI: Yes, it's smart to walk the client through your entire referral process. Show the client letters that you send to people referred to you. You want them to know that you won't annoy their friend by calling them at dinnertime, for instance. You want them to feel comfortable that you will handle their friends carefully. That's where the referral guide helps. You give the client a booklet detailing how you will treat friends they refer to you. You put sample newsletters in the referral guide, articles written about you and a list of your services. Clients may not know all of the different services you provide. You may manage a mutual fund portfolio for the client, but the referral source may be interested in separately managed accounts. So you need to briefly explain all of your services in the referral guide. The fact that you give your client this booklet tells him that you will handle his referral carefully.
GLUCK: Another aspect of your process is touching clients frequently. You recommend 40 touches a year. That sounds like a lot of work.
MASELLI: Some of those touches can be automated-a letter, e-newsletter or magazine subscription. But you can't meet with your clients 40 times a year. And while phone calls are nice, they're not a high-value touch.
GLUCK: They're not?
MASELLI: No. Only if your phone call imparts some wisdom or you have something important to say will it be valued by a client. The phone today is very misused. A monthly phone call-even with no specific message-is good, but it must be augmented by other touches.
GLUCK: You like newsletters. Right?
MASELLI: I love them.
GLUCK: Advisors often think their newsletter has to win them new clients. I have heard advisors say, "Nobody ever hired me because of my newsletter." And I know advisors who have stopped sending their newsletter for a quarter or two as a test, just to see if any clients notice. If no clients ask about what happened to the newsletter, they stop sending it altogether because they say it's not helping them. They have a point, don't they?
MASELLI: No. They really don't. They don't know what they're talking about, frankly. Newsletters do more than the average advisor understands. A newsletter is not going to generate a new client. Nobody is going to pick up a newsletter and say, "Oh, my God, I have to work with this guy." But you never know when a client has the newsletter on her desk and somebody wanders in and says, "What's this?" And that can lead to a new client.
A newsletter is an automated touch point that an advisor doesn't have to think too much about. It's also a way of saying to a client, "I'm not here just to sell you stuff. I'm here to impart value, give you wisdom and communicate with you." Most advisors don't write their own newsletters, which is a good thing, because most advisors don't write well. If you're sending clients a newsletter, it's valuable. It's like casting a net. You don't know the benefits it will bring, and you may never know.
GLUCK: What are your three favorite marketing books and why do you like each of them?
MASELLI: I'll just give you the authors' names and you can read anything they've written. Nick Murray, Dr. Tom Stanley and Harry Beckwith.
GLUCK: You say that your brand ideally can be captured with one word and, to find that one word, you suggest an exercise in which the advisor finishes a sentence that begins with, "You need to call my advisor because ... " What are you trying to do there and how does it affect getting referrals?
MASELLI: You need to create a message in the mind of a client and you need to control that message to the extent you can. So ask yourself, "What do I want my clients to believe about me? What do I want them to feel about me? What do I want them to say about me?" Once you decide those answers, then reinforce that message through your actions and periodic touches. So when the moment comes for a client to say something good about you, he actually has something to say. What are your clients going to say to their friends about you?
You have to think seriously about that. It may surprise you. It's unlikely a client would say, "You have to call my advisor. He made me a ton of money on this stock." It comes down to relationship issues. "You have to talk to my advisor because he really listens to me. He took a lot of time to pay attention to what we were saying." Or, "You have to work with my advisor because he really goes out of his way to solve problems for me. He came into the office on a Saturday." These are the kinds of messages advisors must proactively craft in their clients' minds. It's part of your brand identity. What is your brand identity in the mind of your clients?
GLUCK: You suggest that advisors create a hit list of people that they want to make clients. That sounds a bit unrealistic, like pulling names from a hat.
MASELLI: Most advisors would be able to give you a list of ten or 15 people in their community that they are really interested in working with. It's not unrealistic. Every advisor should have a prospect list. The act of creating that list begins the research process we've talked about. You look into their personal and professional world. You gather their links to existing clients. By researching the prospect, you learn whether any clients could introduce you to the prospect. You may be very well-connected without realizing it. You just need to build a process around it, to explore it with discipline.