One way to develop "real referrals" (as opposed to names you ask for) is to gently and persistently remind your clients you value and accept their recommendations.
I have a document "How to Promote Referrals" available at www.billgood.com/realreferrals that explains how to do this.
Just for fun, I Googled "Financial Advisor how to ask for referrals."
I imagined I would find the usual stuff on different ways to ask for referrals. I was pleasantly surprised. There was a lot less of it.
Make no mistake. Scripts to ask for referrals are still out there. Here is one.
"Whom do you know that is planning on retiring in the next 12 months? Whom do you know that just sold a business? What else can you tell me about that person? Who might be the best person to provide an introduction?"
(Gasp!)
Slaying the Dragon
I'm going to take at least some of the credit for dragging this "ask for referrals" monster out of the financial services industry. Julie Littlechild, the first to survey investors on why and when they give referrals, also deserves part of the credit. In her pioneering 2010 study "Economics of Loyalty," she showed that asking for referrals does not produce referrals.
I nailed it first in 1991.
In my September 2008 column "Referrals Happen," I told the story of when I first figured out that asking for referrals is a no-no.
"In about July 1991, I became the first sales manager in world history to tell his sales force, 'Quit asking for referrals. It's killing us.' But until I saw the light, I fit the classic sales manager mold, constantly haranguing my sales force to ask for referrals. I actually taught people dozens of questions to get names, and then I called the names given 'referrals.' In retrospect, those names were no more referrals than monkeys are gorillas. You can call names from the white pages referrals if you want. And you can call names you sweat out of your clients referrals. But that does not make it so."
Don't get me wrong. When it comes to teaching people to ask for referrals, I am a sinner. I did it.
I once suggested this "technique."
"'Who do you know, socially or professionally, who has common sense and might have some money to invest?' If a client shows any hesitation, I add, 'Think of people with whom you work, play golf, or are in a club.'" (Yuck.)
The problem with this and other such nonsense is simple: It does not result in new clients. OK, OK, maybe once in 200 "referrals."
In 1991, I flogged my sales force to ask for referrals. We generated 503 names in about six weeks. That resulted in three sales. I then called several dozen of my clients and determined that the only referrals that became clients were unsolicited. I then completely reversed course and started speaking and writing against asking for referrals. Why?
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Because it produced names, not referrals.
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Because these names did not become clients.
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Because it put the clients on the spot and made them feel uncomfortable.
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Because it made the advisor feel unprofessional.
The huge bolt-from-the-blue insight was simple: I finally understood what a referral is.
Real Referrals
Let's have a definition: A referral is a name volunteered by a client as someone needing financial advice.
If you ask for it, it's not volunteered. Therefore, if you ask for and get a name, it's not a referral.
So why then do some advisors get all the referrals they can handle and then some? And never ask.
Referral Business
First you must understand this: No one starts with a referral-based business. You first build a business with networking, cold calling or seminars. As you build the clientele, you put in place the system that will enable you to grow organically.
