Sorry, there is no magic. This article will address some of the key issues to unlocking your referral potential. If you are looking for clever sales tactics to get referrals, this article is not for you. If you are looking for deeper insights to become a better and more referable financial advisor who earns the right to ask for and receive referrals, read on.

Most of your clients carry smartphones. Your clients, even your most elderly clients, have some names with contact information programmed into the memory of their smartphones. How many? A few dozen? A few hundred? A few thousand? Who are the people programmed into their smartphone memory? The people they care about most, with whom they have the best relationships, of course. That means that most of your clients come to your office with a device in their possession containing the names, addresses and phone numbers of many people they could introduce you to … if they wanted to. Yet, when asked, most of them say something like, “I really can’t think of anyone right now, but if I do I’ll let you know.” Don’t hold your breath, right? What’s really happening here is that they are unwilling to risk their relationships with their friends, family and colleagues by referring you. Ouch! Sorry, but that’s the truth.
What are the possible reasons for this, and what can you do about it?

1. Not enough trust. How can that be, you say!? “They trust me with hundreds of thousands or millions of dollars, they follow my advice about their money, and we’ve worked together for years!” It’s two different measures of trust. Everyone has an imaginary trust dial embedded in their subconscious. Everything you say and do moves the needle on that trust dial one direction or the other. On a scale of 1-10, perhaps your clients need to have an 8 level of trust to do business with you. Where does the needle on their trust dial have to be in order to risk their most important relationships by referring them to you? Probably higher than the level required to do business with you. Almost certainly close to 10. Do not assume that trusting you with their money or for financial advice, even for a long period of time, means they trust you enough to introduce you to their friends, family and colleagues. You might find it valuable to reread the articles I’ve written on building high-trust client relationships for this magazine.

2. Most financial advisors don’t ask for referrals. Given the overwhelming evidence that financially successful people will meet their next advisor by referral and how much less time-consuming and expensive it is to grow your business by referral, this fact is remarkable. How many financial advisors do you know who have a scripted process for asking for referrals and following up that they consistently implement? What might be the reason for this? Do you remember that classic scene between Jack Nicholson’s and Tom Cruise’s characters in the movie A Few Good Men? “The truth!? You can’t handle the truth!” If referrals are a measure of how much my clients trust me and how much they value my services, then if I ask for referrals and they say ‘no,’ I’m hearing something I don’t want to hear. But it’s the truth. Can you handle the truth? It’s important that you can. Sadly, rather than dealing with the truth, building more trust and adding more value, many financial advisors choose to buy more advertising, run more seminars, do more direct mail or e-mail blasts, do radio shows, have dinner meetings, etc. Check out Bill Cates’ book Get More Referrals Now for great ideas on how to build and implement a referral process.

3. No real distinction between advisors. Some clients are thinking it and some say it out loud, “Yes, I choose to do business with you, but you pretty much do what most financial advisors do, right? So why should I refer you to my friends who already have a financial advisor when they are probably being taken care of by someone who is doing just as good of a job for them as you are for me?” Is that true? Do you pretty much do the same things as every other wealth manager, financial planner or broker? If so, how did you let that happen? If not, how is it that some of your clients think that? Check out Scott McKain’s book The Collapse of Distinction for great insights on how to distinguish yourself, in a good way, from the homogenous bucket of financial advisor mediocrity.

4. Not referable. Mediocre client experience, few deliverables, infrequent or inconsistent client meetings, a value proposition based on investment performance versus goal achievement and being an asset gatherer versus a true advisor are some of the many reasons that make a financial advisor not referable. You have to actually be better in order to be referable. Remember, your clients are risking their most important relationships by referring their friends, family and colleagues to you. Would you refer your friends to a mediocre restaurant or recommend an average movie? Check out www.thetrustedadvisortoolkit.com for great ideas on how to operate at the high level that will make you referable.

5. Perception that asking for referrals is too much self-promotion. This is evidence of thinking from the wrong perspective about who benefits from the referral process. Building your business by referral isn’t just good for you; it’s good for your clients’ friends, family and colleagues. And it’s beneficial to your clients because it’s less expensive and less time-consuming than other forms of client acquisition. How does meeting you benefit your clients’ friends, family and colleagues? How will their relationships with their friends, family and colleagues be enhanced because they make the introduction? You must be able to answer these questions or you’re right to be concerned about self-promotion.

This should not be all about you. One way you can feel good about asking for referrals is by having something of true value for the referrals, whether they do business with you or not. I call this “altruistic business development.” In our process, we use the book Values-Based Financial Planning as the introductory gift. This book is valuable to the referral, whether he or she becomes a client or not. The client writes a nice introductory note on the book describing the character of the advisor and how the advisor will be of value and service. The note will say that the referral will get value from talking to the advisor, whether he or she becomes a client or not.

The book is followed up by eight non-market, investment, product or economic-forecast-related newsletters sent weekly. These are valuable to the referral, whether he or she becomes a client or not. The referrals are much more likely to now be receptive to the follow-up call from the advisor because they are already receiving value. On the phone call, the advisor will offer to be of further value with a personal phone consultation followed by a face-to-face meeting, both of which will be valuable to the referrals, whether they become clients or not.

How much more confident would you feel asking for referrals if you had a service-oriented gift system for a referral process? There’s no “gotcha” sales pitch. It’s just a solid, value-giving, relationship-building process. Some people will become clients and some people will not. And your clients will get good feedback from their friends, family and colleagues about how professionally you interacted with them and how much value they got, whether they became clients or not. How is building your business by referral good for your clients? The bottom line is that all of your expenses are passed on to your clients. The more you spend on prospecting and marketing, the more you have to charge each client or the more clients you have to have. The more clients you have, the less time you have per client. Have you ever considered just telling them the truth about this? If you expect them to trust you, then you have to trust them.

Here’s how this conversation might flow. The perfect time to have this conversation is at the end of a client meeting when he or she is at a peak state of gratitude, is thrilled with the experience of working with you and has received high value.

Advisor: “Many advisors spend too much time prospecting and marketing for the next client at the expense of taking care of their existing clients. I decided to run my business differently by focusing most of my energy on you. That being said, just like I help you make smart choices about your money to achieve your goals, I also have financial goals to achieve and those goals are funded by the profit this business generates for my family. The optimal numbers for this business are 50 ideal clients who each pay $20,000 per year for our services. This provides the revenue necessary for the business to succeed, which is important to you. As well as having few enough clients so there is plenty of time to deliver the value you’re paying for, which is also important to you. We currently have 20 ideal clients and you’re one of them. Essentially, I can spend my time prospecting and marketing for the next 30 ideal clients or I can spend more time being of maximum value for you. As one of my ideal clients, how would you prefer for me to spend my time?”

Ideal client: “We want you to maximize the time for our benefit!”

Advisor: “I’m not surprised to hear you say that. Which is why we have created a very effective way to meet your friends, family and colleagues who might be a good fit to join our ideal client community.”

Ideal client: “How does that work?”

Explain and execute your process. Building your business by referral requires more skill than other methods, but the benefits are significant for your clients, your future clients and you.

Bachrach & Associates Inc. trains the best financial advisors in the world, and those who aspire to be, to create their Ideal Life, build their Ideal Business and work with Ideal Clients. i[email protected] / 858-558-3200. Since 1988.