Why You Aren't Getting Referrals - And What to Do About It
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When it comes to attracting new clients, every advisor knows that nothing beats referrals from satisfied clients.
And the statistics bear this out:
A U.S. study by Cerulli Associates, for example, indicated that over half of investors who selected a new financial advisor in 2009 did so on the basis of a referral.
Common referral mistakes
Despite their desire for new clients, many advisors hold fundamental misconceptions about what it takes to get quality referrals. As a result, they either don’t talk about referrals at all or do so ineffectively.
The biggest reason for the reluctance to ask for referrals is that many of the methods that advisors hear about put both them and their clients under pressure or position the advisor as a needy supplicant.
To the extent they do raise the topic of referrals, many advisors do it in the wrong way with the wrong goal, focusing on “asking for referrals” rather than “having referral conversations.”
And the biggest mistake of all – a remarkable number of advisors’ entire approach to referrals is rooted in their own agenda, rather than today’s client reality.
The ingredients of an effective referral strategy
Advisors are not entirely to blame for this. Part of the problem is that an astonishing amount of the advice on referrals you read in articles and hear in speeches is simply wrong, reflecting outdated old-school thinking.
There’s possibly no other issue on which advisors get more bad advice than the subject of referrals – not only will much of it not help you, some of that advice will actually undermine your positioning and relationship with clients.
This week and next, I’m going to cover 15 common fallacies about referrals – and the realities that you need to understand if you’re going to maximize the number of quality referrals you get in 2011.
Misconception 1: You need to make referrals happen
Referrals don’t happen on their own – you have to make them happen. For a referral to take place, you need to take the initiative in talking to clients about people they know.
A substantial number of referrals aren’t initiated by your clients. Instead, someone they know asks them if they have an advisor they could recommend. These are “reactive” referrals – all your client has to do is respond.
These are the best kinds of referrals – no pressure on your client, with a prospect who’s ready to move.
Because their friend has initiated this, the satisfaction threshold for clients to make a referral here is lower than for referrals that advisors initiate. As long as you’ve done a good job and they’re reasonably happy, all that it normally takes for the referral to happen is for clients know that you’re open for business.
So that’s the first step – in a professional, low key fashion, let the people you work with know that on a selective basis you’re taking on new clients .
More on how to do that below.