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Generating More High-Quality Referrals

Do-not-call laws make a solid referral pprogram key to your sales success. Learn how to get referrals without ever having to ask.

By Lynn Vincent

Americans today pump their own gas, bank online and use the self-checkout at Home Depot. They don’t know the name of the grocery checker, the pest control guy or even their regular mail carrier. They shop for their own services on the Internet, and would prefer, frankly, to see all telemarketers lined up and shot.


MAKE YOURSELF REFERABLE. Do this by pointing out to clients the “impressive outcomes” you are achieving for them so they want to refer you, instead of you having to ask. Also, giving impeccable service helps make you more “referable.”

CULTIVATE CENTERS OF INFLUENCE. Pursue referrals from professionals who comprise your clients’ advisory teams, like estate-planning attorneys and accountants. Phoning them is the most direct way to get this relationship started.

EXTEND YOUR NETWORK. Ask clients who else they have working toward their financial well-being, and then let those professionals know exactly what you are doing for their client. If you are too busy to do this, outsource it.

DON’T STOP. A referral system—of any kind—will not produce results unless you keep at it. And remember, when you do get a referral, a simple thank-you is invaluable.

Congress stopped short of that remedy with last year’s federal do-not-call law. Thus armed, consumers nationwide opened fire:

In California, L.M.A. Marketing Inc. of New Smyrna Beach, Fla., provoked complaints from more than 250 angry Golden State consumers. In January, the state attorney general filed a lawsuit accusing the telemarketer of violating the new federal do-not-call law.

In Pennsylvania, 30 consumers in 23 counties called the Bureau of Consumer Protection to complain about illegal phone solicitations for books, magazines and music from Time-Life Inc. The state attorney general ordered Time-Life to pay $30,000 in penalties for allegedly failing to obtain Pennsylvania’s do-not-call list before dialing consumer households.

In Wisconsin, more than 5,000 consumers complained in 2003 to the consumer protection department about violations of the state’s new do-not-call law. Such complaints last year topped the list of consumer gripes in Wisconsin, more than doubling the number of calls generated by 2002’s top target of consumer pique, telecommunication company practices.

That gasping sound you hear may well be the death of the cold call. Long a marketing staple for sales-based businesses, consumers are increasingly aware that they no longer have to tolerate telephonic dinner interruptions. And the existence of do-not-call lists makes cold-calling individual households dicey at best.

That makes another marketing staple, referrals, more important than ever. But the distance created by electronic media such as email and online banking, coupled with the recent terror-related media focus on privacy rights, has generated a new jealousy over privacy. In this environment, asking a client for the names and phone numbers of friends and family can come off a little like what one author called “the grinning, over-friendly houseguest.”

In pointing out to the client the specific outcomes of your service promise, you plant a one-liner in his vocabulary that he’ll probably use when referring prospects to you.

But you can generate referral business without asking clients directly. Read on to learn how some advisors are dumping the cold call and generating referrals without coming on too strong.

Why asking feels weird
According to a recent survey by the Insurance Marketing Resource Center, nearly two-thirds of agents said they get at least 25 percent of their new business from referrals. But only 16 percent of agencies said they had an organized business system to generate referrals.

Maybe that’s a good thing. Traditional generation systems—like having clients fill out a referral card at closing, or asking them to put you in touch with three close friends (preferably those with money)—increasingly rankle today’s clients, says Randy Herz, a principal with Herz Financial in Farmington, Conn., and a member of Hartford AIFA.

Herz says formulaic referral-generation systems are still widely talked about in the industry. “"But my point is… if you treat people like you care about them, you’re going to get referrals,” Herz says. “"If you treat them like points on a card, they know it."

Marketing expert Doug Carter, author of Clients Forever: How Your Clients Can Build Your Business for You, explains why: Once the advisor has delivered on her sales promise, and the client has signed the closing documents and written the necessary checks, both have fulfilled a basic societal driver called the law of reciprocity. Reciprocity is the belief that if I do something for you, I have a right to expect that you’ll do something of equal or greater value for me.

“"As soon as an agent asks for a referral, the relationship is thrown out of balance," says Carter. The client knows the advisor has just gone beyond reciprocity—the client has fulfilled her end of the sales transaction, but the advisor, who is supposed to leave the client feeling served, has now asked the client to serve him.

“"There’s practically nothing the advisor can do to repay the client for referrals," says Carter. “"Consciously or unconsciously, the client knows this.".

Herz adds this: “"If you get to the close and have to ask at that point for referrals, you’ve missed something along the way. What you should be doing at closing is reiterating your service promise. Clients know you want more business—you don’t have to tell them."

If client-to-client referrals are made of gold, referrals by other members of a client’s advisory team are made of platinum.

Be referable
The way Herz looks at it, referrals come from having done something that is impressive. But clients, many unfamiliar with what’s involved in, say, securing a great premium rate, may not recognize it as impressive. Advisors, Herz says, need to point it out. Did you secure a better underwriting decision for the client than he should have gotten? Did you put all his assets in linked, easily managed accounts? Did you structure a policy in a way that was unique or special?

In pointing out to the client the specific outcomes of your service promise, you plant a one-liner in his vocabulary that he’ll probably use when referring prospects to you: “We should have paid much higher premiums on our UL policy, but our advisor was able to get us a great underwriting decision.”

The point, says Herz, is to make yourself referable. “Improve your service to the point where your ‘referability’ is unmistakable,” he says. Producers “do things too quickly, skimp when delivering policies, give presentations that are half-baked. Reformulate your processes until clients can’t wait to tell their friends and family about you.”

The Herz referral that one attorney received was so glowing that the attorney called Herz and asked to fly halfway across the country to Herz Financial’s offices to meet the advisor team. When he arrived, Herz had a full, catered lunch laid out in the board room—gourmet food, upscale presentation, all done to a T. The client “was impressed and expected to be impressed,” Herz says. “We never said anything about getting a referral, but have already gotten a number in a very short time.”

Let others do the referring
If client-to-client referrals are made of gold, referrals by other members of a client’s advisory team are made of platinum. Not only is the client primed to trust you, but centers of influence (COI), such as estate-planning attorneys and accountants, can generate multiple clients instead of just one at a time.

Many advisors already build their business through other professionals, but Dan Sondhelm’s advice for cultivating them may surprise you: Call them up. Some marketing gurus recommend connecting with COIs through such standard networking techniques as rubbing shoulders and trading cards at local chamber of commerce meetings. But Sondhelm, a partner at SunStar, a Virginia-based financial-services marketing firm, calls that a layered approach.

“Don’t stop the meetings,” he says, “but a direct call is another way. If you’re going to a chamber meeting with a goal of getting 10 business cards, set a similar goal for contacting centers of influence by phone, say 10 calls a week.”

Sondhelm recommends asking yourself where you’re getting your business now. If it’s Joe the accountant down the street, can you clone him? Are there other accountants reachable through the phone book or local business journal? Call them and ask, “Can we do breakfast?” If that’s not your style, ask if you can send them some information.

Remember, your real goal is to build a relationship that will result in qualified leads.
—Dan Sondhelm, SunStar

“Offer them business, too,” Sondhelm says. “Centers of influence don’t have to be a two-way street, but if they aren’t, the giver of referrals will often stop because he’s not getting what he needs in return.”

For Michael Horbal, the move to COIs evolved over time. Kicking off his career as a life wholesaler, he never received formal training in developing referral business. “But I worked with hundreds of agents across the country,” says Horbal, principal of and a member of Bucks County AIFA. “I was able to see who the most successful agents were, and take a bit from each and roll it into my own program.”

Four years ago, Horbal had what he calls an awakening. As he noticed an increasing number of colleagues successfully generating new business by networking with attorneys, accountants and other estate and finance professionals, “I started going after those centers, too.” The result: A tremendous spike both in prospect quality and the number of prospects who turn into clients.

“If I look at my cold marketing, like the Internet or the newspaper, I’d say 15 percent of everyone I talk to via those channels turn into clients,” Horbal says. By contrast, he estimates that three of four prospects referred by his COI contacts wind up doing business with him. Horbal also estimates a 60 percent reduction—from five meetings to two—in the number of client contacts required either to close a sale or terminate the relationship with a particular prospect.

Horbal prefers to literally network his way into his network. During the sales process, he always asks his clients who their attorney is, who their accountant is, or both. Then at closing, he reminds the client of any especially good service he was able to provide—a great premium deal or tricky estate-planning hurdle cleared, for example.

“I ask the client right out if it’s OK if I contact their accountant or attorney, and share that success,” Horbal explains. If the client agrees, he sends out a letter describing to the client’s other advisors what he, Horbal, accomplished on their client’s behalf.

As a call generator, he always includes something of interest in that person’s particular field. For estate-planning attorneys, he’s found an interest-grabber that generates a return phone call, fax or email almost every single time: premium financing. This is an arrangement in which a high-net-worth individual needs some type of expensive permanent insurance, but doesn’t have (or want) the liquidity to pay the premiums. A bank or other financial institution finances the premiums, earning on the deal through an interest-only loan; the insurer sells the policy; the advisor earns a commission; and the newly insured client keeps his cash. It’s a winner all around. But since most people have never heard of premium financing, Horbal whets their appetites with a little information, and then waits for COIs to call him.

Dan Sondhelm encourages advisors implementing a COI program of referral generation to stick with it: “A lot of times an advisor will get frustrated and say, ‘Boy, I’ve got this centers-of-influence program going and I don’t have any clients yet.’ Remember, your real goal is to build a relationship that will result in qualified leads. You’re asking other professionals to entrust you with their clients. Those professionals have to trust your business judgment, integrity and ethics. That doesn’t come quickly.”

Source it out
Building a COI program doesn’t always come easily for advisors who are either too busy to do so, or simply hate making the calls. The solution: outsourcing. That worked out well for a Boston financial advisor who hired Sondhelm’s company SunStar to build a COI program. SunStar analyzed where the advisor’s business was coming from—mainly one attorney and one CPA—and then marketed the advisor to other lawyers and accountants in the area.

“We actually did the calling for him,” Sondhelm says. “Not every person we called was interested, but some were. Over time, many of those meetings turned into friendships and relationships.”

One of those relationships developed into a marketing partnership. The advisor and one of the CPAs that SunStar turned up now market to each other’s clients during co-branded seminars. Meanwhile, the advisor reports stellar sales results from referral clients generated by the COI program: He estimates a 30 percent increase in leads and a 50 percent increase in lead quality. And the time it takes him to close each sale has decreased by half.

Keep at it
For any referral system to work, the key is consistency. This can be difficult for independents, says Andrea Nierenberg, a sales and networking consultant, and author of Nonstop Networking. Advisors are so busy making the sales “that they forget to build their businesses,” says Nierenberg. Her client list includes Citigroup, PricewaterhouseCooper and UBS Paine Webber. “Knowing the trade and craft is important, but the reality is you have to be thinking about the next client, and keeping your name out there.”

Again, the problem: In today’s pro-privacy, anti-phone-call world, how do you keep the referrals coming? Says Nierenberg, “Just say, ‘Thank you.’” Genuine and unobtrusive expressions of gratitude can generate good will—and new business.

Nierenberg calls her system the thank-you chain. Here’s how it works:

  1. Let’s say client Jane refers you to prospect Sue. You send Jane a thank-you note for the referral.
  2. Sue becomes a client, and Jane gets another thank-you note. That gives you another chance to touch base with her, as well as provide an unspoken reminder that if Sue liked you so much, perhaps Jane might like to refer other friends your way.
  3. You do such a great job for Sue that she refers you to two more prospects who also become clients. Sue, of course, gets a thank-you note, but guess what? So does Jane. Why? Because she is the original reason that you now have three new clients.

“Saying thank you,” says Nierenberg. “helps keep you on people’s radar screen in a simple and subtle way.”

That’s especially critical today. According to a recent report by HNW, a financial-services marketing and research firm, new business is increasingly hard to come by:

  • One-third of the leading financial advisors say it’s more difficult to retain clients today than it was five years ago.
  • As many as 40 percent of clients would consider another advisor or are actively seeking one.

With that many potential clients contemplating an advisor-switch, now is the time to become referable, build COIs and keep yourself on clients’ minds.

Lynn Vincent is a frequent contributor to Advisor Today.

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