30 Referrals A Year: How To Get Them: Why Advisors Fear Referral Talk

This document provides advice on how financial advisors can get more referrals from their existing clients. It discusses that most advisors are uncomfortable asking for referrals due to fears about damaging client relationships. However, it notes that advisors likely have more leeway than they think when it comes to discussing referrals with clients. The document then provides tips for advisors to test a client's "damage threshold" for discussing referrals and get a better understanding of how assertive they can be with different clients. Some key recommendations include tuning into individual client communication styles, asking clients open-ended questions about their satisfaction instead of directly asking for referrals, and giving clients additional value-added services to incentivize referrals.

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30 Referrals A Year: How To Get Them: Why Advisors Fear Referral Talk

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30 Referrals a Year: How to Get Them

By Daryl Logullo
June 23, 2004

Most advisors fear they'll jeopardize their current client relationships by discussing referrals. Rather than
assuming it's a taboo topic, get comfortable with referral talk by tuning into your clients. Here's how.
Do you get all of the referrals you want and deserve?

To put a fine point on it, have you been able to cultivate and secure 30 new client referrals each year
you've been in business?

If you've answered no, I have a concept for you to think about: the "damage threshold" of each client
relationship. The damage threshold is the real—or imagined—line you're afraid of crossing when you
think about asking for referrals.

It's a fact that most financial advisors are uncomfortable asking a client for a referral. It doesn't seem to
matter if it's a family member, business associate, or a client of 20 years—talking about referrals can be
downright frightening! Basically, we operate as though the damage threshold for every relationship is
zero!

It's true, you can hurt a relationship by pressing it too far, but you probably have more latitude than you
think. You'll get more referrals when you make sure you know what your client's real damage threshold is
and you let go of the imaginary one.

Consider this: of 5,200 investment and insurance professionals surveyed earlier this year by Strategic
Impact!, an overwhelming 79 percent said they rely on referrals as their primary source of new business.
Eighty-three percent of those professionals had at least 100 clients. Yet the median number of referrals
they received from their clients over a 12-month period was just 6 to 12!

That means that, on average, only about 10% of their clients are generating referrals! If clients are your
best source of new business—and you know they are—then that figure indicates a tremendous problem.
It shows that most financial professionals are behaving passively in the referral process rather than taking
a proactive role with their clients. The question is why.

Why advisors fear referral talk

Let's look for a second at some of the "arguments" against being active in obtaining more client referrals.
Typically, when I'm coaching an advisor to become more active in seeking referrals, I hear things like:

1. "I don't ask my clients for referrals, I earn them. . . "

2. "My clients will refer me business when they're good and ready. . . "
3. "If I ask, I'll appear to salesy or it will cheapen my image. . . "

Let me be blunt: These are poor excuses. They're driven by an overblown sense of danger based on an
inaccurate assessment of each relationship's damage threshold.

What I'm referring to is nothing more than that psychological barrier where you imagine the worst possible
thing will happen if you ask a client for a referral. Before you can even contemplate how to bring the
subject up, your brain kicks into warp speed and says, "I can't ask them for a referral; they might get mad
at me. . . feel upset. . . be uncomfortable. . . [insert your excuse here]. . . or worst yet, they'll just say,
'No!'"

Your conscious mind gets into the act, and you wrongly start envisioning that worst-case scenario coming
to life. You see yourself offending someone, being presumptuous, asking the wrong way, feeling
embarrassed, and finally ruining a prized relationship. We get concerned—downright scared, even—that
somehow by talking about the subject of referrals, we'll really damage the relationship. So we avoid
bringing the subject up at all.

Four ways to break through

Sure, there can be some risk in talking about referrals. The key is that you must test each relationship to
see where the damage threshold lies in it. Don't let your brain go into overdrive and generalize a worst-
case scenario for every client. Instead, tune in and figure out how assertive you can be with each
individual, and where their limits lie. Here are four ways to go about doing this:

Be more in tune to your client's communication style. The damage threshold is different for every
client and customer, depending on that person's communication style. "Some of my clients like to be
treated directly and can handle straight talk," says Bryce Hyden, a financial advisor in Boulder, Colo.
"Others are a bit more timid or uncomfortable." Still other clients get instantly turned off, regardless of
what he tries to discuss with them. Understanding your clients' varying styles of communication and
receptiveness to your goal of building more business will go a long way in cultivating referrals.

Know how to 'ask' for referrals. Nothing evokes more fear in advisors than the thought of sitting
down with a client and "asking them" for referrals. So don't do it! That's right—don't ask for referrals.
"I've refocused on earning personal recommendations from clients," says Susan Calia, a Phoenix,
Ariz.–based advisor who two years ago had $25 million under management. Today, her assets have
swelled to $95 million. The key, as Calia has learned, is that you must test and confirm with every
client that they are finding value in you and your work.

Use a monthly meeting, lunch, or quarterly review to touch base. "I ask one simple, very powerful
question," says Calia, "'Mrs. Client, tell me: How am I doing in my relationship with you?' The answer
allows the referral door to swing wide open—or temporarily close tight." Either way, you've got a
much better read on the relationship.

Practice with your C-level clients, and then move up. While you're honing your skills, practice on
relationships where the stakes are not so high. Take some of the pressure off yourself by building
self-confidence and enthusiasm—and seeing referral results—with B-level and C-level clients. "It's
highly unlikely that you would ever offend someone who has confirmed your value," says business
coach Jeff Pasquale of Rapid Growth Central, based in Boynton Beach, Fla. But, he says, if you do
upset someone, let it be a C-level client that wouldn't be irreplaceable if they should take their
business elsewhere. As your self-assurance and belief in your referral-building skill increases, move
up to your B-level clients, and when you're really comfortable, begin talking with those on the A list.

Give clients a reason to share you with others. I believe in the 80/20 Rule when it comes to client
referrals. The 80/20 Rule says that 80 percent of your clients utilize only about 20 percent of the
services you have to offer. That means they've only experienced a fraction of the value you can bring
to their friends and family. One way to counter this is by bundling current services as "value-added"
extras—this shows appreciation for your current client relationship while simultaneously giving your
clients more reason to suggest your services to others. Bundled extras might include a free college
planning review, business succession consult, or a review of long term care needs. Advisors may
take such routine services for granted, but I have seen them used as powerful tools that create new
client referrals. Just imagine a client you are now servicing who suddenly experiences your help with
funding college, working out life insurance needs, selling his business, or even creating a charitable
giving plan. Wouldn't that client be a better advocate for you and your work? Of course.

Remember, you want to introduce the subject of referrals with your clients without adversely affecting the
relationship at all. You want to get near their damage threshold, but you must never cross it. It's like
stepping near thin ice—without ever falling through. Stay in the area where the relationship provides
enough support for what you're saying—and don't overload it.
For example, if you've only worked with a client for a few months, you haven't really earned the right to
ask for a referral—so don't ask. But get close enough to the damage threshold that you can talk casually
about how your work can benefit other people.

Don't break your client's boundary. But do find out where it is. You can introduce the topic of referrals
subtly with some, more openly with others. When you do, you'll see your client referrals and introductions
gradually—and comfortably—increase.