NAIFA's Advisor Today Keyword(s)

 E-mail   Print  Share

Building a Referral-Based Practice

Get on the fast track toward building a profitable practice.

By Ted Rusinoff, CFP

“If prospects don’t call me and ask to buy insurance, I don’t know what to do to go out and find them. I only know how to work in a referral situation.”

Not many financial advisors can join Randy Kilgore, CLU, LUTCF, RHU, past president of NAIFA and current president of Randy Kilgore and Associates, in saying these words. Quite a few advisors spend a good portion of their time actively seeking clients and are not in the enviable position of working only in a referral situation. But all is not lost. This article has tips and techniques for operating a referral-based practice to help advisors do business the Randy Kilgore way.

Tip No. 1: Be referable.
Before you can begin the process of building a referral-based practice, you must first be referable. The focus of your entire practice has to be centered on providing value for your clients. As noted by Paul Rodak and Lochlainn O’Haimhirgin, principals with Legend Financial Group in Cleveland: “If you build a client-centric practice, where everything you do is built around improving the lives of your clients, the referrals will take care of themselves. If your clients perceive a high degree of value added to their lives because of the service you provide, they will tell their friends about it naturally.”

Quick Tips for More Referrals

Start a referral club
Start a referral club with members of your local business community. The club creates a sense of belonging and camaraderie among your fellow businesspeople, and it’s a forum expressly for sharing referrals among members.

Give your clients an experience
To get referrals, you must make working with you a memorable, one-of-a-kind experience. Make your clients want to refer their friends to you. Develop a tagline that cleverly conveys who you are: “John Smith, Wealth Producer.” But that’s just the start of the experience. You need to take it further.

One financial-services firm tells its clients it will help them “get to the top of the mountain.” The top of the mountain suggests they can see all around the world. To emphasize that, the company has turned each of its offices and conference rooms into a different “country.” One room has a large mural of Athens on the wall, another depicts Paris, and so on. The company says its clients often bring their friends by to see the offices, even without an appointment. Can you imagine a better way to attract new business?
— Mary Beth Kuzmeski
Red Zone Marketing, Libertyville, Ill.

Many firms create their own opportunities for being referable. Some identify a niche market in their geographical area and set out to become the local or regional expert; others focus on delivering the highest level of service possible. Some firms have moved away from defining their client as an end user or beneficiary of the services and products they offer. Instead, they focus on other advisors and help them provide value to their clients.

No single approach is the right approach for every organization, but there is typically a best approach for any given firm. In his book, "Good to Great", Jim Collins tells of the great firms that first identify what they can be world-class in and what they love doing, and then find a way to get paid for doing that task.

Focus on service
Serving the middle-market retiree community was a niche market that Richard Sullenger identified more than 25 years ago. During his first years in the business, Sullenger, president of The Sullenger Financial Group in Bakersfield, Calif., and past president of the MDRT, struggled to survive until a mentor told him to stop focusing on selling and redefine his focus on service.

“So I began to focus on building impeccable relationships with my clients and we have proof positive that it works. We have clients who have been with us for over 30 years,” he says. Using service as the basis for a strong relationship with clients who were being overlooked in his geographical area, he has become incredibly referable. Knowing that satisfied clients invariably tell their friends about good service, his firm uses a simple “do what you say you are going to do” motto as the basis for its service model.

Phillip Harriman, CLU, ChFC, of Lebel & Harriman in Falmouth, Maine, agrees that serving the needs of your clients has to be the primary focus of your practice. “My partner and I have a philosophy that choosing between what pays well and what is right for the client is not an option. We know that if we do the work well, there will be rewards,” he says. Harriman, a past director of the Association for Advanced Life Underwriting (AALU) and incoming president of MDRT, specializes in financial and estate planning. He and his partner, Michael Lebel, a specialist in the 401(k) market, have fostered this approach for the past 25 years. They continually receive referrals from existing clients, their advisors and other advisors. “Our goal with every referral is to have an unsolicited call from the new client to the referral source, thanking him for making the introduction,” Harriman says. “That is a strong endorsement of your referability. Everyone likes to be thanked.”

Both Sullenger and Harriman are using their referability to build succession plans for their firms. As the next generation of financial-services professionals joins their offices, they are able to continue delivering on their service-oriented models and maintain their firms’ referability. “Being referable makes this business transferable … otherwise, the next generation would have to start from scratch,” Harriman says.

Tip No. 2: Identify your ideal client.
Another way to build a referral-based practice is to identify your ideal client. Firms that have been the most successful with a referral-based model have spent significant time on identifying and defining the people and situations that allow them to deliver on their version of the Good to Great philosophy. Ron Ware, J.D., a partner with Trust Design in Franklin, Mass., narrowly defines his firm’s ideal clients: “They must be goal oriented, nontransactional individuals,” he says. Through a clear definition of who they can best serve, Trust Design can become referable to those individuals. When these referrals later become clients, Ware has a clear goal, which is to “build a relationship with a high level of trust and create top-of-mind awareness.” His company hosts quarterly, new-client dinners, client-appreciation events and long weekend outings to provide value and build relationships centered on trust. “We try to become a family member, one who helps care for their future and helps them implement their plans for the next generation,” he says. Ware has noticed that the benefit of this focus is more time to work on building relationships and less time on trying to find new clients.

Other organizations have identified a need they can fill. Lauren Schwab, founder of Schwab Financial Services in St. Louis, started in the business by accident. With a degree in history and slim pickings for jobs, she began helping a local insurance agent. She noticed a tremendous demand for help in fixing the incorrect or incomplete planning others had done. “I realized there was a real need for client advocacy in helping them plan and buy the financial products that are most appropriate for them,” she explains. This became her passion and, today, is her sole focus. CPAs and attorneys in the St. Louis area know that she is a resource who can help their clients.

Due to the nature of her work, Schwab’s typical client has a net worth of more than $5 million and is either retired from owning a business or is a retired professional. “I never dreamed I would have a firm that attorneys call to introduce their clients to, but the right tools and methodology in the planning and review process, built on objectivity and credibility, will make the difference,” Schwab says.

Other firms have taken a different approach to defining their clients. Chip Witrock, for example, defines his client as the advisor—not the end user—of his services. His company, Life Audit 101, specializes in the audit and evaluation of a specific asset—life insurance. CPAs, attorneys and bank trust officers are his clients. With a specialized focus, Witrock is able to clearly define who benefits from the services he provides and with this focus, has experienced significant improvements in the quality of his life, compared with his past years as a retail insurance agent. “It used to be office hours six days a week, from 8 a.m. to 6 p.m.; now we are only open from 9 a.m. to 3 p.m., Monday through Thursday,” he says. Both Witrock and Schwab use a specialized tool to provide an objective and specialized audit analysis and review of insurance policies.

“There is an enormous need to review insurance in today’s environment,” explains Tim Ash, president of Ash Brokerage. “With lack of objectivity, independence and access to the market, agents need additional support to provide a service that is valued not only by the insured, but by the insured’s other advisors as well.”

Tip No. 3: Cultivate other professional advisors.
Professional advisors of your existing clients are also another good source of referrals. If your client is pleased with your service and has spoken well of you to his advisors, you are ready to begin cultivating a relationship with those advisors. Today, many of these advisors are working in the financial-services industry. In pursuing this group, try not to paint with too broad a brush and be perceived as a potential competitor. With most of these companies, you need to clarify your service offering to complement what they have.

Don Culver, president of Culver Companies in Boulder, Colo., realized long ago that he “was no good at banging the phones,” he says. “So I began looking at the other advisors in my area to identify their needs.” Today, if he is hired to help another advisor, he charges fees if commissions are not possible or shares in the commissions if a product sale is evident. The bottom line is that his expertise provides value and regardless of the setting, he can be compensated for his time and talent.

He has this piece of advice, however: “You have to consciously appear nonthreatening; otherwise, these advisors feel there is too much risk in making an introduction to their clients even if you are the only one with the perfect solution.” Culver is a member of NAIFA, MDRT, AALU and The American Society of Pension Professionals & Actuaries, and uses his membership in ASPPA and experience in the qualified-plan environment to help differentiate himself from other advisors.

Tip No 4: Create the perfect time for referrals.
If you have given your referral sources a motive to provide you with a referral, create the perfect time for them to do so. Many firms use client-appreciation events with “bring-a-friend” opportunities. Those with a focus on the advisor community use continuing-education sessions and regular breakfast and lunch meetings.

It is important to remember, however, that a referral road is a two-way street. Often the best time to get a referral is when you are making one. With any referral source, take good care of the information you receive.

An important point to remember is to always give the source feedback on the outcome of your conversation or meeting with the referral. Providing this feedback gives you an opportunity to refine your source’s vision of the right referral for you as well as a chance to thank him for the opportunity to work with him and his friends, family or associates.

Tip No. 5:
Know when to say no.
The last piece of advice in helping you move to a referral-based practice is to know when to say no. If you are referred to someone who will not be able to recognize enough of your value to be as satisfied as the person who sent him to you, or the person is simply not a good fit for your practice, don’t develop that relationship. Simply walk away. Walking away will protect the relationship you have with your referral source. You must view protecting your “referability” and your existing relations as a higher priority than simply growing your business.

Ted Rusinoff, CFP, is vice president of marketing at Ash Brokerage. He consults with producers on case design, specializing in estate, investment and insurance planning. You may reach him at

Referrals Only

Randy Kilgore, president of Randy Kilgore and Associates and past president of NAIFA, works on a referral-only basis. You might be saying, “That may be possible for an agent who has been in the business a long time, but I don’t have a whole lot of connections.”

But according to Kilgore, working strictly on referrals is “really not complicated—anybody can do it.” Here’s how he suggests you start: Take your CPA to lunch.

Your CPA is referring his clients to someone—some agent or advisor—so it might as well be you, Kilgore says. And if he’s not sending business your way, it may be time to reevaluate that relationship. “Take another CPA to lunch that you feel you have a connection with, that you feel comfortable with, and build that relationship up,” he says. “The same should be done with your attorney. If you don’t have an attorney, take some to lunch and build up a professional relationship with them.”

Keep expanding from there; go through the roster of other professionals you associate with—your doctor, your dentist—and do the same. “Referrals between professionals are key to building a practice that will last,” says Kilgore.

If you are hesitant to ask your CPA to lunch, Kilgore says to remember that there are very few people who are going to turn down a meal. And about those who don’t want to meet with you: “When you call your CPA or other professional to invite them to lunch, they may ask, ‘What’s the reason?’ I just say, ‘I want to tell you a bit about what I do.’ If they don’t respect you enough to accept the invitation, you have the wrong professional, and it’s time to find someone new,” he says. —Maggie Leyes


See other articles about Prospecting

Conference Newsletter

Contact Us   |   Reprint Permission   |   Advertise   |   Legal Notices   |   Join NAIFA   |   Copyright © Advisor Today 1999-2017. All rights reserved.

AT Blog
Product Resource
Digital Magazine