The Anatomy of a Robust Financial Advisor Referral Program (with Script)

08.20.19 | Dominique Henderson | 0 Market post img

Looking to start a financial advisor referral program? This article will break down the most common roadblocks that advisors face when creating a referral program. Bonus: Check out the referral request script included at the bottom of this blog.

Does asking for referrals as a financial advisor still work?

Virtually every advisor gets told, at one point or another, that client referrals are a growth engine for their practice. And, despite some hints to the opposite, research shows that referral marketing for financial advisors is far from dead. In a recent report from consulting firm Cap Gemini, 44.4% of high net worth clients have found their wealth manager through a referral. Results from Charles Schwab’s 2018 RIA Benchmarking Study show that 40% of growth in some of the fastest-growing firms was attributed to client referrals.

Sure, other methods of getting clients are important, too. But in our experience consulting with over 200 financial advisors in the last 2 years, referral marketing can work remarkably well.

Unfortunately, many advisors get this wrong — and lose access to a powerful tool for practice growth. 

So today, I’d like to share with you two key obstacles to creating a robust financial advisor referral program — along with a script that has a proven track record of delivering good results for the advisors who have tried it.

Referral Fail # 1: Not asking for referrals

The most common reason why financial advisors don’t get enough incoming referrals to fill their prospect pipeline is because they don’t ask!

Let’s dig into the dynamics of why that happens. For the advisors that I have coached, it often comes down to one of two factors.

One, they don’t want to ask their existing clients for a referral because they don’t want to get a clone of that existing client. This often happens when a financial advisor has transitioned from the early years in the business, when he or she was willing to take on any client to keep the lights on. Three to five years in, that advisor might feel financially secure enough to get selective about new clients… But, unfortunately, they discover that few if any legacy clients fit the “ideal new client” profile. Or perhaps you have had a lot of transactional business in your early years and want to shift away from that.

The best way to move beyond this obstacle is to clearly communicate what you are looking for in an ideal client. After all, your legacy clients know all kinds of people. There’s a good chance that some of them would be a great fit for your service. But you will have to be smart in how you talk about this, because “I’m looking for more clients just like you” clearly won’t do the job.

The second common reason for not asking for referrals is because the advisor feels that he or she has already been compensated. They don’t believe that they have earned referrals, because a referral would go above and beyond the monetary fee they have received for doing financial planning or managing someone’s portfolio.

For my coaching clients who have run into this roadblock, I remind them that a great financial advisor delivers a service that’s worth more to the client than the fee. Therefore, clients subconsciously know that they have received more in that exchange than what they paid for. That internal disbalance makes them open to doing valuable things for you, their advisor.

Unfortunately, there is no way for me to empirically “prove” this to you. So, if you are struggling with this obstacle, you will just have to do some soul-searching about what your service is actually worth… and then go out on a limb and ask for that referral.

Referral Fail # 2: Not delivering a client experience that’s referral-worthy

Another big reason why a financial advisor referral program might fail is because you don’t deliver a “referable” client experience.

Think of it this way. In asking someone to make an introduction, you are effectively asking them to spend some of their social capital. And that can feel quite risky. After all, if they make an introduction and their friend/neighbor/co-worker isn’t impressed, then their own reputation might suffer.

The quickest way to ease that concern would be to present your clients with real-life examples of other clients who have been referred to you successfully, or with examples of referral sources who looked good for having made a referral. Unfortunately, doing this would land you in hot water with compliance faster than you can say “no testimonials”. 

So, what’s your compliance-approved alternative?

The one recommendation that I usually fall back on is really simple (and also incredibly hard to get right). Deliver outstanding client value. If you’d like to go deeper into this topic, check out this article on creating an optimal client service model for financial advisors, or this piece on building a financial advisor value proposition. As a short summary here, you must convince clients to refer based on the strength of their own experience of working with you. If they experience a lot of value, their perceived risk in making an introduction will go down.

How do you know what your clients find most valuable about the experience you deliver? The best way to find out is to ask them.

You might experiment with asking every client or prospect this one question at the end of every meeting…

“What has been most valuable to you about today’s conversation?”

Then, all you do is listen and take notes. This exercise will give you a better understanding of your clients. It also comes with a nice side-effect of bringing your clients present to the value they have received. If they can verbalize that value to you, they will be able to do in when speaking to their friends and neighbors!

Maximizing a financial advisor referral program

A lot of foundational work on building a financial advisor referral program is about facing your internal beliefs and gaining a better understanding of what your clients find to be valuable. However, once you have those pieces in place, there is a script that can help you get more referrals.

I have discovered this script through the work of Phil Jones. He has written several books, and if you have an hour you can watch this video where he presents this concept at length.

If you don’t that hour right now, that’s OK too. Here is the script that he recommends. I have used it successfully in my own firm. I will include the script below in its entirety, then dive deeper into why it works.

Here we go.

An advisor referral request script

At the start of a meeting with an existing client, you set the stage for a request that will come later.

“Here is our agenda for today… And at the end of the meeting, I have a small favor to ask of you, if that’s OK”.

That opening allows the client to give you permission to make a small, reasonable request. With that expectation firmly set, you can go into your standard client meeting. As you prepare to wrap up, give the client an opportunity to ask questions. Ask them what they have found most valuable about today’s conversation, then pivot to your request.

“You wouldn’t happen to know one other person, someone like you, who would benefit from [insert client’s key value point]?”

The words are important here. The request is worded as a soft challenge, but at the same time, it’s easy to accept. It sets the bar really low. After all, we all know at least one other person like us who can benefit from something we have found valuable!

With the request made, allow it to sit for a few beats while you watch the client’s gears turning. As you observe the request sink in, you can follow up with,

“Don’t worry, I don’t need their information right now. I’m just curious, who were you thinking of?”

At this point, the client will probably share a name. You can lower the pressure even further by emphasizing that there isn’t anything to do right now.

“I don’t need any of the contact information right now — but when do you think you will see [insert name] next?”

As the client shares their next opportunity to see this person, you can close the loop with the request.

“When you see [insert name] next time, would you mind me doing another favor? Would you mind having a quick chat with [him or her] about the experience that you and I have had [insert client’s value point] to see if they’d be open to taking a phone call from me? Maybe some of the ideas that have helped you might help them, too.”

What about follow-up?

How will you know whether your client has actually mentioned you to their friend? They might bring it up organically on a phone call or in an email (“And by the way, I have mentioned your name to my friend this past weekend. He said that he will reach out to you during the week.”) But, just in the event that they don’t, it’s a good idea to set up an opening to check in on this.

Here’s what it might sound like.

“Is it ok if I check in with you after you’ve met with (insert name of friend)?”

Chances are, your client will be comfortable with that — and if they would rather initiate the follow-up, they will let you know.

When you do call the client to check-in, be sure to leave plenty of room for them to have forgotten. Make it OK. Chances are, your reminder alone will bring them back to their promise and nudge them into action.

Why does this financial advisor referral request script work?

There are two reasons why this referral script has worked well for me.

First, you ask for the client’s permission to request a favor. That clearly places the power in the client’s hands. As a result, the client feels empowered to help you (not backed into a corner).

And second, it’s low-pressure. You are not asking the client to produce a dozen names with corresponding phone numbers.

In fact, this method sets a proper set of expectations on both sides. The client expects a small and reasonable request. The advisor expects to get one name at best — and removes him- or herself from the process, other than to check-in. The power to make the introduction rests with the client, who knows that you won’t hound his or her friend directly with a dozen phone calls (because you didn’t ask for contact information). This allows your client to spend their social capital wisely — and lets you build a successful financial advisor referral program.

What challenges have you encountered in asking for referrals? Any referral surprises or out-of-the-park successes? Share in the comments! It might just get someone else to make the request today.

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Dominique Henderson

Dominique Henderson is the founder of DJH Capital Management and director of Client Experience at Brewer Consulting.  He’s spent over two decades in financial services helping clients do more with their life and money — and helping advisors grow their businesses.  Connect with him at [email protected].