The Two Times Clients Refer You

There are two times people will think to refer you – and, no, when you ask is not one of them. They are just after they have a positive experience with you and when a friend expresses a need for a solution you represent.

Clients will talk about you after a meeting or interaction, providing it's memorable. The good thing about this is that you don't have to do much to prompt it beyond giving them an experience worth talking about. People naturally discuss with friends what's been happening recently. If you take care to create a positive experience, you have done what you can. Ever get an unsolicited referral from client soon after meeting with them? That's this effect in action.

The bad thing is this effect does not last long. Maybe a day or two. A longer-lasting way to stimulate referrals is to have your clients associate you with some specific solution or experience. This is documented in Julie Littlechild's report  Anatomy of the Referral. When asked the question "what were the circumstances of the last referral (you gave to your advisor)?" 48% said “because a friend asked for a recommendation" and 57% said "because a friend described a financial challenge." The key, then, is to define what solution you represent so clearly that when a friend expresses a need to your client you naturally pop to mind.

Your referral marketing program should start with defining what solution or experience you represent. Define that in conjunction with clients and adopt their language for it. Using their language rather than our own industry specific technical descriptions helps them remember. It must be different than other advisors.  It must be a reason your clients come to you specifically and not just to a financial advisor generally. Have a plan to communicate that description often and in different ways. Keep reminding them what you excel at and what you deliver.

Consistently drive that message deep into the clients memory. Once it's there, you will find your clients referring you more consistently. Our clients are presented with opportunities to refer us all the time. The question is whether they will remember to recommend you when the opportunities arise.

To Get Referrals, Your Clients Must Understand Your Target Market

When Andrew Sullivan, of Sullivan and Schlieman in Atlanta, formed his client advisory board, one of their top recommendations was to give each of them a card listing his services and accomplishments. Their request was "tell us how to sell you."

In a recent client advisory board I facilitated, the participants told the advisor "tell us who your ideal client is, so we know who to refer." It is not the first time I have heard that kind of feedback from clients.

Experiences like this raise two critically important points. First, there is clearly a strong willingness, even an enthusiasm, on the part of clients to make referrals. This is not really surprising – Julie Littlechild's research has shown that as much as 91% of our clients are willing to refer. (It also demonstrates why participants on an advisory board tend to be a firm’s best referral sources!)

Second, it is the strongest proof I can imagine that advisors must clearly define what they do and for whom. They must be able to describe their niche, their target market. Remember, these advisory boards are composed of the advisors’ best clients – the ones who should know best what they have to offer.  And yet, they asked for guidance on what kind of clients the advisor hoped to attract.

If you believe you have defined your target client, here is how you can test how well you have done. Try this experiment – next time you talk to a couple clients you are on particularly good terms with, and who would be willing to take a minute for a little thought experiment, ask them this question: If I sent you into a cocktail party in the next room full of all kinds of people, and I asked you to refer a couple of them to me as prospective clients, how would you figure out who would be the best ones to send to me?

I suspect that most clients would answer "I don't know." And if that's the response, you will know why you aren't getting more referrals. Your clients are not sure who you're looking for. And whatever you have done so far to define and communicate your target market, your value proposition, and your ideal client, you still have work to do.

Defining who you want as clients and what unique solutions and experiences you provide to people like them are the foundation of referral marketing. Get those two things right, and attracting new clients becomes much easier.

Morningstar Gets Most Of It Wrong – An Illustration Of The Hazards Of Writing Your Own Survey

Last week, Morningstar Advisor ran an article reviewing a survey they recently did with 980 investors and discussing some of the conclusions. The article provides a great illustration of the mistakes you can make surveying clients, with examples of the two most common errors advisors make when writing their own.

The article reviews respondents’ answers to the question of what is most important to them about a financial plan. The sample size was relevant, the selection of survey participants seems reasonable, and the numbers are clear. These facts, in conjunction with the fact that it was Morningstar sponsoring the survey, make the first obvious mistake surprising. The author disregards the data and presents the conclusions he wants to be true. One example is the first comment about the relative ranking of Quality of the Systems/Reporting: “Although this is not a highly ranked item, it is important nonetheless.”  Let me reword that: The clients did not think this was so important, but they should have. Even more dramatic is the discussion of the response to Stability and Quality of the Firm: “That could be interpreted to mean that clients value advice they get regardless of the stability and quality of the firm. However, I believe that clients want to do business with stable, high-quality firms…” My own inclination is to believe that clients place some importance on the stability and quality of the firm that provides them advice; but it is amateurish to argue against your own data when presenting survey results.

Most advisors I see are not so shortsighted as to argue against their clients’ responses. The second mistake of this survey is the one I see most commonly – poorly worded questions. The survey purports to find out what clients value most about a financial plan. However, there are essentially no questions about a plan. All the questions relate to investment management or the firm that provides it. Many advisors, when drafting their own surveys, word their questions in a way that reflects what they believe the answers should be. They inadvertently reflect their assumptions and biases in the questions themselves, skewing the outcomes and providing misleading conclusions. The creator of the survey clearly has an investment management orientation. If he does any actual financial planning for clients, he does not take it very seriously. Consequently, the results of the survey are of no real value to a practitioner who is interested in what clients consider important about financial planning. Beyond the choices that the clients can make to answer this question, there is the issue of the nature of the question: Should this be a multiple choice question without an “other” category, or should there be an additional short answer question to pick up responses not anticipated by the author? It is the unexpected answers that actually provide the most value.

Obtaining client feedback is the foundation of improving your service, increasing client loyalty, and generating referrals. Surveying is a science and there is a lot of value that comes from retaining a professional’s guidance. Firms like Advisor Impact can deliver this expertise at a very reasonable cost. If you are sincerely interested in finding out what's important to your clients and using it to improve the experience they have of your firm, an investment in an experts help will pay itself back many times over.

In a market crash, what you ask your clients is more important than what you tell them

One of the joys of volatile markets is that you can actually remember the lessons of the last big downturn, because it was not that long ago. 

The market has now fallen enough that we are referring to certain dates in 2008 in the statistics overviews.  That bear market, the second “once-in-a-lifetime” decline in ten years, took a tremendous toll on advisors and clients alike.  And the advisors who managed to keep their clients to stick with long-term investment principles did the best by their clients, and earned more than their fees.

One of the significant ideas to arise from that difficult time was the importance of doing as much asking as telling.  This is anecdotal and unscientific but significant observation – the advisors who invested their time telling their clients to hang on fared worse than the ones who asked their clients about their concerns.

Julie Littlechild, President of Advisor Impact, tells the story of an advisor she spoke to toward the end of that market, who reflected on his experience in trying to calm his clients. “He talked at his clients for two years, tried to say, everything’s fine, everything’s fine, everything’s fine, this way, that way, dance a little, but he was beginning to realize that the conversation maybe wasn’t two-way and perhaps that he hadn’t acknowledged their fears sufficiently.”

I remember talking with an advisor who engaged his advisory board in designing the best way to address clients’ concerns about the down market.  They came up with the idea to do “town hall” meetings, each with a brief presentation and lots of time for questions and answers. The meetings were a huge hit.

I remember Bob Curtis, CEO of PIE Technologies (who produces MoneyGuide Pro) showing advisors how to communicate the effect of the downturn on clients’ plans rather than their portfolios, and pointing out that the real question on their minds was not “How far will this go?” but “Will I be eating dog food in retirement?”

The best thing you can do for your clients is to acknowledge their fears, let them know you do not know where this is headed (at least short term) and are watching things carefully, and then to ask them what their biggest concerns are and let them speak. 

IPI study: advisors think their service is better than their clients do

The Institute for Private Investors released a study that, I believe, discloses some shocking statistics. If you are concerned about attracting and retaining clients, the study is something you must reflect on. Although AdvisorOne somehow translated the results into the headline "Wealthy Investors Say They're Happier With Their Advisors" reading the study, Both Sides Now, set off alarm bells for me.

The lead statistics is that 63% of ultra high net worth investors are fully satisfied with their advisor relationship. I don't know what your high school experience was like, but anything below 65 was a failure when I was there.

Shockingly, 95% of advisers said their clients are fully satisfied. So, 32% of advisors think there clients are happier than they really are. Is it any wonder we are disappointed with the number of referrals we get?courtesy iStockphoto

Reinforcing that overall statistic, the study found, among other things, that 63% of investors agreed “my advisor produces results in concert with my

family’s goals and risk parameters,” with 17% disapproving of their advisors’ performance. An SEI study I recently wrote about on Advisors4Advisors highlighted the importance clients place on their advisors’ understanding their situation and needs.  This specific kind of failure will lead pretty directly to losing the relationship. Further, a significant portion of those investors do not believe their advisors are utilizing their full resources to the clients’ benefit or providing adequate access. If you are the advisor to one of those clients, your relationship is at risk.

Fortunately, the study also identifies the direction to a solution. “We are seeing a clear trend toward engaging in more of a partnership with the advisor, a natural evolution as investors learn more about due diligence in the aftermath of the financial crisis,” reports Charlotte Beyer, IPI founder and CEO. “Advisors have longer lasting relationships with investors who wish to be a partner in a dialogue.” This reinforces Julie Littlechild's finding it Anatomy of the Referral: when clients believe there feedback is sought and implemented, they are more engaged, satisfied, and loyal.

The message is clear – involve your clients in a dialogue and discover how they really feel about your service. If you can uncover client disappointment on how well you leverage your resources for them, on access to you, or on the results to deliver, you have the information you need to give them the experience they desire.