When asked how organic growth is achieved, advisors always point to referrals from centers of influence and/or clients. According to Schwab’s most recent benchmarking study, referrals account for more than 60% of asset growth coming from new clients. With such an emphasis on referrals, it is imperative that advisors design an efficient process for asking for referrals and converting on these new client opportunities. In our experience, advisors make two critical errors associated with their approach to referrals.
The first mistake is the most common and ironically, the most obvious: advisors simply don’t ask for referrals. I have been told countless times, “We treat our clients like family. They love us. They know to refer their friends and family — we don’t need to ask.” The assumption is that the client who loves their RIA has in fact thought about referrals to begin with! For many people it simply doesn’t cross their mind. Assuming it has crossed their mind, their client could think, “These guys are so incredible, they are at the top of their game! They clearly don’t need me to send them any new clients!” Or, the client could possible think, “These guys are the best! I don’t want my level of service to drop, so I can’t share them with anyone…the more clients they get, the less time they’ll have for me!” Both potential client beliefs could impede the number of referrals received by happy clients, so it is critically important that advisors deliberately ask for referrals and assure clients that the firm can handle more business.
The second common mistake applies to how advisors are asking for referrals. The popular approach seems to be waiting for a quarterly review with a client and at the end of the meeting, as the client is gathering their things and heading out the door, the advisor sheepishly asks a very vague and open ended, “So, if you happen to know anyone that could benefit from our services, please be sure to pass on our name!” This puts the client on the defensive and flusters them as they frantically do a mental scan of their rolodex. More often than not, they can’t come up with a name on the spot and respond to the vague request with a vague answer of their own: “Let me think about it and I’ll get back to you!”
An alternate way to approach a client about a potential referral is to do the work for them – perform the research on their behalf ahead of the meeting. Figure out who works with your client, who sits on boards with, who are members of the same charitable organization, etc. Then, simply contact the client and say, “I’m going to be reaching out to Bob Smith…I know you and he sit on the board for Children’s Hospital – I read an article that quoted both of you about the tremendous work you are doing there! I think he could really benefit from our new estate planning offering that you and your wife have enjoyed so much – do you mind if I use your name when I contact him?”
With this approach, the client only needs to say, “Yes!” They aren’t being asked to make mental connections with their network and figure out which of the RIA’s services would best fit each potential referral – that work has already been done for them. Many times, the client will hear this and say, “Why yes, Bob is the perfect person for you to reach out to! I hadn’t thought of it before, but he told me just last week that he’s got some estate issues that need addressing…I can’t believe I didn’t think of you when he mentioned it!” Or, “Yes, definitely reach out to Bob and mention my name, but now that you mention it, someone at church was just asking me about estate issues, and I forgot to get back to them – let me introduce you two via email this afternoon!” Or, an excited client may say, “Yes! Definitely use my name with Bob, but I’ll do one better for you and I’ll call him myself – he’ll love you!”
Happy and satisfied clients want to see your business grow and achieve success, but many times they don’t know how to do that for you. Take as much work out of the process for them and present a scenario that only requires them to say, “Yes!” and nothing more. Once you’ve provided them with a name and a specific solution you are offering, the client’s referral juices can kick in and they’ll think of other names for you. With a vague, “Do you know anyone that would benefit from our services?” you are asking the client to push the boulder up the hill. With a much more specific, “I’m going to contact Bob about our estate planning services, can I use your name?” the boulder is placed at the top of the hill and the client only needs to give it a simple “Yes!” nudge, and gravity will do the rest!
