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Want Referrals? Then Just Ask

Many advisors do not ask clients for referrals to avoid embarrassment. Here’s a plan to gain referrals.

By Preeti Vasishtha

If statistics are to be believed, then 85 percent of advisors do not ask clients for referrals. Only 15 percent of clients voluntarily offer referrals without advisors asking for them. It’s a Catch 22.

“The problem here is that the advisor doesn’t want to embarrass himself by asking for referrals,” says Kerry L. Johnson, Ph.D., a Tustin, Calif.-based professional speaker and author, who also runs a coaching company. “The client doesn’t know that the advisor wants referrals. So the client does not volunteer because he thinks the advisor is successful and the business is doing very well. If you do not ask, you are not going to get them.”

So how should you go about asking for referrals? Johnson has a five-step plan:

Explain why you want the referral.  Tell your client: “I love working with you. I try to build my practice through my best clients. Who do you know could benefit from the kind of relationship we’ve had so far?”

This isn’t as simple as it seems. Your client may say that he doesn’t know anybody. Then, advisors need to employ another subset of skills, which Johnson calls the “three-month script.” This consists of catch up, update and referral.

First, you catch up with the client every three months to find out how the client and his family are doing. Second, update your client on how his investments have performed since you last spoke to him, and how the market is behaving. Just before you ask for referrals, there’s another step called the “referral bridge,” a concept based on reciprocity. “If I let you know all the work that I have done for you, and the success you have had working with me, I have then obligated you to be a little bit more candid with me, especially on referrals,” Johnson says.

Ask your client: “Your investments have done 9 percent in the last year. How are we doing for you so far?” The client is likely to say, “You’ve done a great job.” At this point, the advisor needs to go right into referrals and say: “I really like working with you. I am trying to build my practice. You’re one of my best clients. Who do you know could benefit from the kind of relationship we’ve had so far?”

Expect to get 250 referrals from each client. This number sounds really high, but it is possible to gain that many referrals, Johnson says. “I am a member of a tennis club and if you ask me for introductions, I will give you the directory,” he says. Of the 600 members, Johnson knows about 400. “I will just keep circling names in the directory that you can call,” he says. “Now, that’s only one group that I belong to. I belong to five other groups.” Similarly, every client of yours belongs to several groups that you can leverage.

Find something about their personal life.  Does the referral play golf or tennis? How many kids does he have? “If I called you and said that I was referred by someone you know, and if I know the college you went to, and the name of your husband, there’s no chance you are going to blow me off,” Johnson says. “You are going to give me at least five minutes and you will be polite to me.” Ask the client who is giving you the name of a referral: How well do you know this person? What’s unique about him?

Seek the comfort response.  This is based on the notion that an advisor wants to prepare a culture of referrals for the future. “I do not want anybody in the future to tell me that I do not give referrals and it’s not something that I am comfortable doing,” Johnson says. At the end of the first meeting with your client, say: “I really enjoy working with people like you. I try to build my practice through my best clients. What will I have to do in the next few weeks to make you comfortable enough for you to introduce me to your friends?” Johnson says that clients will give the names of the people they know right away or will give the names once you keep your promise and do what the client has asked you to do.

Listen for referrals.  People talk about their friends. For example, they’ll talk about a friend who recently lost money or made a million dollars. At the end of such a conversation, you can have two names on the spot. Just say: “It’s amazing he did that. What’s his name? Can I talk to him? What’s his phone number?”

Johnson recommends asking for referrals only from those clients you want to duplicate. If you ask for a referral from a person who makes $50,000 yearly, chances are the person will refer you to people with similar salaries. “If you ask someone who makes $300,000 a year, he will refer you to a person who probably makes that much money,” Johnson says.

Avoid These Techniques

These methods are simply outdated and don’t yield results:

  • Do not tell your client that you make money in two ways—by doing business with that client and from the referrals that he gives you. “By saying that, you are asking for something before you have established value,” Johnson says.
  • Have you said to your client: “If you know somebody, don’t keep it a secret? Just give me a phone call?” This is called advertising referrals and it doesn’t work, Johnson says. “Clients don’t walk around thinking that they need to find someone for the advisor to talk to. They will forget what you said as soon as they leave the building.”
How To Approach Referrals

Now that you have gained referrals, what’s next? Here’s what to say when you call them up:

Introduce yourself.  Give the name of your company and referral source. Say: “We have a mutual friend called Mr. Client. You know him, don’t you?” You need to get the person to respond to you in the next seven seconds, Johnson says.

Add the personal touch.  Say something like, “Mr. Client told me that you lived in London. That must’ve been great. How was that different from living here?”

Gain interest.  Tell the referral: “I have been working with Mr. Client for the last three years and we give him above-market business. I’m not sure I can do the same for you, but I would like to chat with you a little to see if I can be of benefit. Is there a chance we can talk?” By doing that, you are gaining your referral’s interest, Johnson says.

Qualify.  Do not talk to people you do not want to do business with. Ask the right questions to qualify. Some questions to ask: “Mr. Client tells me that you have a successful company and your pension plan is more than $500,000. Is that true?” Another way to say that is: “In order to help me prepare for the meeting, would you say that your retirement program is more than $200,000 or less than that?”

Book an appointment.  Use the alternative-choice close. Ask your client: “I am free on Tuesday afternoon, but is Thursday better for you?”


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