The Obsolete “By-Referral-Only” Policy

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If you’re using this ego-stroking language – “by referral only” – to describe how you work, yet would take on a million-dollar prospect you met in the proverbial elevator, you’re arrogant and you’re lying.

Many advisors want to describe their businesses in ways that point to exclusivity, professionalism and class. There’s nothing wrong with that. However, saying you’re a “closed shop” can shut down conversations and backfire on you.

Reality check

During a recent Q&A time after a speech I gave, one advisor matter-of-factly mentioned he worked “by referral only,” which he explained meant that he only accepted new clients who came as referrals from existing clients.

I asked him if he was flying home later that night from the conference, which he was. So, I inquired, “On the flight home, if you find yourself seated next to a mid-30s, confident, pleasant businessperson, who also happens to live in your hometown, and you ascertain that they and their spouse own a decent-sized company, have some concerns about their financial direction and clearly aren’t thrilled with their present advisor, and don’t want to work personally with their firm’s 401k provider, and you realize they could be ‘loaded,’ would you turn down any business because they don’t necessarily know someone with whom you already work?”

To which he replied, “Don’t be crazy! Absolutely I’d look to bring them on; in fact they sound ideal!”

So why is he claiming his business is “by referral only”?

Don’t misunderstand me. There’s nothing wrong with building your business by referrals from existing clients. Doing that is great and shows strong trust within your client relationships. Just realize there’s no need to describe yourself to people as “by referral only.”