To Ask or Not to Ask? Develop an Effective Referral Strategy in a World of Contradictory Advice

7. Tell referrers how you will interact with those they refer. Clients are often reluctant to refer friends and family for fear they will be hounded. Let your clients know what the referral follow-up process looks like.

8. Tell referrers about your ideal client. The more established your firm, the more clear you want to be with referrers about the kind of client you're looking for.

9. Follow up swiftly. Letting referrals pile up on your desk before following up tells the

referrer you didn't really want the referral after all. Following up within two days is a good rule of thumb. A written process that involves your office staff can help ensure prompt follow-up. For example, when you get a referral, who contacts the prospect? Who puts the name in the database?

10. Thank referrers in writing. This is a hard and fast rule: Whenever you receive a referral, thank the referrer in writing. How formally you do this is up to you; the most important thing is that the thank-you is sincere.

Referral Approaches
Finally, let's review some specific approaches to asking for referrals. Again, it's important to adopt an approach, or a combination of approaches, that works for you.

Mining your own database. Go through your client list and sort out those who came to you as referrals. Then, jump-start the referral conversation by reminding those clients of how you met them.

Automatic value-added discussion. Integrate asking for referrals into every client meeting by adding the line, "What value has this meeting provided you?" to the bottom of the agenda. When clients respond, ask if they know anyone else who would appreciate your services in the same way they do. This creates a referral moment.

"Can you think of … ." Being asked for referrals may put people on the spot, causing their minds to go blank. To stimulate clients' memories, try asking about their colleagues or business associates. For example, if the client is a general contractor, ask him about the plumbers, farmers, or electricians he works with.
Agreement. When you bring a new client on board, explain up front that you will ask him or her for referrals in six months. The idea is that the client will receive such exceptional service from you in the first six months that he or she will happily agree to share your name with others.

Events. "Bring a guest" events can be quite effective at generating referrals, as long as you have the requisite event planning skills and creativity. You may even want to host a "booster club" event exclusively for those who referred you in the past year. Just keep in mind that, for this elite group of your biggest fans, the event should be very special.

Annual campaign. Rather than asking clients individually for referrals, send out two or three creative promotional items per year that relate to the referral theme, and follow up with calls. Clients will come to look forward to receiving something intriguing in the mail. Because referral campaigns can be implemented by staff, they require little involvement from the advisor.

By referral only. Adding the words "By Referral Only" to your business cards, website and all company literature is an easy-to-implement referral tactic. But it's only a legitimate approach if all of your clients really do come from referrals.
Direct approach. Some advisors simply don't understand all the hubbub about asking for referrals. They just ask and don't worry about contradictions, best practices, or approaches. (They're also probably not the ones reading this article.)

By now, it should be pretty clear where I stand in the ask/don't ask debate. I truly believe that, when done well, referrals are one of the fastest, least expensive, and most effective ways to get new clients. Just remember, there are as many referral strategies as there are advisors. Rather than getting caught up in conflicting viewpoints, work on developing a referral approach that feels right for you and your clients.     

Joni Youngwirth is the managing principal of practice management at Commonwealth Financial Network®, member FINRA/SIPC, a registered investment adviser, in Waltham, Massachusetts. She can be reached at [email protected].