Yield of Dreams

Everything You Know About Referrals Is Wrong

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If you want something, just ask for it, as the saying goes. In this industry, that same philosophy has been applied to getting referrals. But Stephen Wershing, president of coaching firm The Client Driven Practice, says advisors are going about getting referrals all wrong. His new book on the subject, Stop Asking for Referrals: A Revolutionary New Strategy for Building a Financial Service Business that Sells Itself, comes out Sept. 7. I saw down with Wershing to find out just what’s flawed about the traditional referral process, and how advisors should go about fixing their businesses.

WealthManagement.com: What do you think is flawed about the way advisors go about getting referrals?

Stephen Wershing: Well let’s go straight to the most obvious: Asking for them is a bad idea. As social animals, we make referrals all the time; it’s part of our nature. Why do you do that? Scott Degraffenreid, a social network analyst who wrote a book called The New Art and Science of Referrals, discovered that we make referrals because it increases our standing in the eyes of our peers. So if we understand that what we get out of it is an elevated standing in the eyes of our peers, we can set up our practices so that when our clients refer us to people, that happens to them too. The key of it is, we’re an event-driven business. People need financial advisors at particular points along the way. There are all kinds of things wrong with asking, and one of the primary ones is that it doesn’t pay any respect to timing of the client who needs us.

The key is, if we can prepare our clients for the opportunity to refer us, then that’s what pays off. If I teach my client trigger phrases, like if I do ‘rollovers,’ or ‘retirement planning,’ when somebody says something like that, it’s more likely they’re going to spit the advisor’s name out at them. The biggest problem with asking for referrals is that it’s all about us, and whenever we’re talking with clients, it ought to be all about them. If we can orient our practice so that we can enhance that natural process than we’re enabling our clients to get the benefits of referring us, rather than trying to pry it out of them cause we want it.

WealthManagement.com: How can advisors orient their practice so that they’re more ‘referable’?

SW: If you’ve specified who your ideal client is and you’ve specified what solution or experience you deliver and you keep talking about that over and over with everybody you come in contact with, it’s a lot more likely that when somebody finds somebody who is that kind of client and who has that kind of need, that they’ll remember to mention it.

One of the things they can do that will set them apart the most is thinking about things that are not traditionally associated with financial advice. For example, Carol Ann Wilson, is a divorce planner. Not only does she do the financial planning part of divorce, but she’s got all kinds of resources on her website that talk about details about the court process, how to maintain a relationship with your kids if you’re not the custodial parent, etc.

One of the big mistakes that advisors make is not understanding what differentiators are, and they do this all the time. If you go to 100 financial advisor websites, 98 of them are going to say the same thing. When I ask advisors why a client should choose them over another advisor, they say, ‘Well, because we have a great reputation, we’ve been in the business a lot time, we provide great customer service, we produce good returns.’ And you go around the room, and everybody says the same thing. People confuse strengths for differentiators. All the things they talk about are what I call ‘table stakes.’ They’re the things that you have to ante up just to play the game. If you want to do financial work for clients, the first chips you have to throw on the table are good service, objectivity, integrity, trust, those kinds of things. They will not separate you. Now that they’re up there, what’s different about you? People don’t get that.

Another key is finding the best clients that you have that meet the description of your ideal client and then getting structured feedback from them. We really do the deep dive when I go in and do a client advisory board for them. Then I can ask what I call the ‘come, stay, leave questions’: Why did you come? Why do you stay with this advisor? What kind of thing could they inadvertently do that would make you leave? Then you can tweak your process to tailor it more and more to what those ideal clients want. You can bring them new ideas and say, ‘What do you think?’

WealthManagement.com: How does social media play into this? Do you think it’s a good medium for getting prospects?

SW: The national brokerages, they still have a big challenge because they’re going to be the last ones to get into it in a meaningful way because of the compliance issues. But there is a way that you can utilize social media that doesn’t require any compliance approval, which was Sam Richter’s idea, the author of Take the Cold Out of Cold Calling. If your firm will let you post aLinkedIn page, then you can get on there and connect with a lot of your clients. If you connect with somebody on LinkedIn, then you can see everybody that they’re linked to. Now if you have adequately defined your ideal client, you can look through your client’s contacts and get a pretty good idea of who would make a good prospect for you.

In this case, instead of asking for a referral, we’re going to ask for an introduction, cause that’s a fundamentally different thing. If I ask you ‘Who do you know?’, not only am I asking you for a name and an introduction, I’m asking you to do my work for me. I’m asking you to prospect for me. But if I just ask you for an introduction, that’s a way different conversation.

WealthManagement.com: Do you think advisors should use their fiduciary status as a differentiator?  

SW: The whole fiduciary issue is a marketing dead-end. For something to work in marketing, it’s got to be attractive to people, which means that they can see value in it and they can understand it. Fiduciary doesn’t fill either one of those. You and I know why it’s important to be held to a fiduciary standard, but that’s a pretty technical idea. Clients don’t understand that. What do they care about? ‘Are you going to put my interests first?’ So they go to their broker, who’s not even in the same area code as the Act of 40, and they say, ‘Are you going to put my interests first?’ And the guy says, ‘Sure.’ And if congress is successful by putting all of us under a fiduciary standard, then by definition it’s not a differentiator.

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Casting a gimlet-eye on asset management issues.

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