Have you ever wondered why good clients who know plenty of people rarely seem to send referrals? A financial planner in Pennsylvania told me a story both answering the question and providing a solution. It’s all based on human nature.
Why don’t some clients provide referrals? The simple answer is they don’t see any sense of urgency. People don’t rush to the 24-hour convenience store either because they know it is always open for business and what you need at that moment is always in stock. These are different businesses, but the same logic prevails. There is another reason client do not rush to provide referrals: There is no scarcity factor. Like the convenience store that always has coffee and soft drinks on hand, your clients assume you have no capacity constraints. If you could bring 100 new people into your practice, they could send one friend in your direction whenever they get around to it.
How Do You Create Scarcity?
You might believe “a car is a car” but if you order a new Corvette, you might be waiting 11 months for delivery. (1) Corvettes are on allocation from General Motors. (2) This creates scarcity.
How does the financial advisor create scarcity? The Pennsylvania financial planner explained it starts with a process:
1. List your best clients. These are the ones you would like to replicate. They likely have significant assets and get a high level of attention.
2. Set three restrictions. You are going to estimate how many you could add to your clientele, but we aren’t at that stage yet. Before any new clients are added, you agree to three restrictions: You are not giving away any clients. These new clients will be in addition to your current book. You are not tiering service. First Class and Coach seating is the frequently used example. Your plane only has first class seating. You are not adding new clients at the expense of reducing service to some other clients. The final restriction is you are not adding additional sales support. Whoever is helping you now is helping you once these new clients have been added.
3. Determine how many new clients you can add. Based on those restrictions, a good advisor knows when their service model would get overloaded. Keeping those restrictions in mind, many experienced advisors would come up with a number less than ten new relationships.
4. Build this into your 2024 business plan. It is that time of year. Include growing your practice by adding that number of large new relationships into the 2024 business plan you share with your manager.
Sharing You Plan With Your Clients
You have done your homework. Now it is time to create scarcity and exclusivity. Call each of your beat clients and have the following conversation.
1. You speak: After pleasant introductory conversation, you explain: “I have done a business plan for 2024. In my plan I have determined I will be to add seven (or your number) new relationships similar to yours to my practice.”