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04/10/2007 - Referrals-the final endorsement

In putting pen to paper on this article I realize that this may be the most controversial of all the topics I have discussed in my regular business updates. Why controversial? Mostly because there is such a gap between what is said about the subject and actual practice.

Before I go any further with describing the “best practice” I have come across over the years and many visits to successful IFA’s let’s try a self analysis quiz. Answer the following questions allocating the number of points shown if the answer is yes.

I have a leaflet describing the service I give to clients (3 points)
My business card has ”By referral or recommendation ” printed on the card(1 point)
I have a list of all the clients who have sent me a referral(2 points)
I have the value of the earnings from each of these referred clients linked to the client who referred them(5 points)
I have a budget each year for generating referrals(3 points)
I run events where my clients can bring a friend or business colleague who is not yet a client of mine(3 points)
On my factfind there are lots of soft facts to assist my client in thinking of a friend or colleague to refer me to (3 points)
I always give a small gift to the clients who refer me to someone else(2 points)
I always describe the kind of client who I am looking for (5 points)
I can easily tell you at anytime how many referrals I have received in the last twelve months and there value in earnings.(5 points)
I always ask clients for referrals when I see them.(8 points)

How did you do?

If you scored 1 to 10 points I would be surprised if you were referred to many people

If you scored 11 to 20 points then you probably get referrals on a reasonably regular basis, however many of them prove to be a waste of time.

If you scored 21 to 30 points then referrals are a very valuable source of profitable long term relationships and your firm is growing strongly.

You scored 31 to 40 points!! Exceptional the only real challenge you have is your tax bill!!

Ok a bit of fun however there are some serious lessons to be learnt from your own answers.

Why should anyone refer you?

Why do people refer an advisor at all? What motivates them to do so not just once, but on a regular basis? Let’s consider why people feel motivated to make a referral of any service at all. Think back to the last time you ate at a restaurant and whether you have since recommended it to a friend. What was it about the experience that inspired you? No one recommends an averagely priced meal, which was reasonably cooked served adequately in reasonably clean surroundings by polite staff. One of these or sometimes all four elements was exceptional. I went to a restaurant a few years ago in New York where to be frank the meal was ok, the surroundings were definitely basic and I cant remember what the bill was. However the staff were amazing, all had a tremendous sense of humor, took the trouble to get to know us and gave us lots of advice about New York. I have since sent at least 6 couples to the same place and thankfully they had the same experience. So what is it about your service that will be memorable for your clients?

How can you and how do others make their service memorable? I would need a book rather than an article to cover all the examples I have come across however here are some.

1. Use of financial planning tools- such as the Prestwood Lifetime Cash flow analysis. Whilst the full report can be daunting for most clients, selected extracts can be extremely powerful in demonstrating to the client the consequence of failing to plan. I know one IFA who demonstrates the software on a large screen at all of her client presentations.

2. A simple brochure - or leaflet describing your service, containing testimonials from existing clients. Never assume your clients know everything you can do for them. It also gives them something tangible to pass to others.

3. A website-with useful tools for them to interact with such as tax calculators or currency converters and a regular monthly update or news bulletin.

4. Regular seminars- for your clients or their friends to attend discussing topical issues.

5. Regular social events- to thank them for their efforts on your behalf. One IFA in Bristol twice a year hosts a meal sponsored by a local wine merchant as a wine tasting event. His clients regularly bring friends who virtually always become clients. Another IFA in the West Country hires a boat and takes clients and friends for a day on the river.

6. Use research tools- such as Aequos and engage the client in using them

Remember whilst you may think these ordinary your clients wont- why? Because they have never had this level of service before.

This brings me to the first learning point that I have observed. Most advisors say that it is them that people recommend, that they relate to the client and that the client trusts them. Certainly you are not going to get a referral if you come across as untrustworthy, not confident in your knowledge or that you can’t relate to your client. However in my experience it is the advisors who accept this as a given and demonstrate that something extra that get many more quality referrals rather than those who rely on the client “liking” them.

To ask or not to ask-what is the question?

This is the one question that if you get 12 advisors in a room there will rarely be agreement on. Yet I have observed that it is the one thing that separates the successful from the average.

An advisor in Cornwall I know, who is a sole trader has developed his own factfind to include soft questions that are not often found on a factfind, such as

“How long have you lived in the area?”

“Do your family live in the area, brothers, sisters?”

If self employed-“How do you find your own clients”

“What sports do you play and for how long have you played”

“What is in particular are you are looking for my service to deliver”

“If you have used a financial advisor before how did he let you down?”

All of the soft questions are on the left hand side of the fact find next to the relevant hard facts questions on the right... I asked him” Why do you have the questions in print like that?” He immediately responded “Because I forget to ask them if I don’t remind myself”

So when this advisor asks for a referral he doesn’t say “I am delighted that you are pleased with the service, can you think of two people who would also benefit” he says

“When we first met you mentioned that your brother lives in the area and started his own business two years ago and that it’s going really well. How do you think I could help him with the service you know I give?”

Some readers will say “Too Intrusive” or “tacky” I am sure. Well the advisor in question has exceeded a million pound in turnover in one year and he has never placed an advert anywhere.

A second example

An advisor I have known for many years in the Midlands always gives a client a £25 M&S voucher or Amazon Voucher to his clients when they agree to ring a friend or family member to introduce him. The important difference, which I have not seen before, is that he gives the voucher to the client at the meeting NOT when the client has made an introduction. I asked him” how do you know they will make the call?”

“That’s what I used to think, and I used to give the voucher when I had been introduced. The problem was though that at least 30% the time they just forgot, I used to get embarrassed asking them later so quite often the moment was lost. Once I gave them the voucher at the beginning then they had the monkey, not me. Since I made the subtle change 100% of clients make the call. I have even had clients ring me to say that their friend already had an advisor and so they were sending the voucher back- obviously I told them to keep it as I was sure they would soon speak to someone else.”

I recently visited an extremely successful IFA in Cardiff. The lady, the only advisor in the practice, was in my view the consummate professional, in fact in my next article I will be writing an in depth profile of what she actually does to ensure a very successful practice. In brief, she is a Certified Financial Planner, charges £1500 for her initial lifetime cash flow analysis and works on a combination of monthly retainer fees and recurring income from moneys under management. She has been a finalist in the female financial advisor of the year on a number of occasions.

Her approach to referrals was summed up in her statement;

“I always start every initial consultation with saying that as they know my clients are usually referred by other clients and that I will be asking them for details of colleagues who they feel will benefit from the same service. It’s important to mention this from the outset so that they expect it and that there is no surprises. At the end of the presentation and conclusion meeting I always ask them if they can think of three people and would they mind ringing them to introduce me.”

My own Chairman, Ken Davy says that he always asked his client” Can you think of two people who would benefit from the same service” and then give them time to answer.

I guess many people find asking difficult as it may lead to embarrassing silence or someone declining. Remember though the worst a client can say is “Not at the moment” and there is no better feeling when someone demonstrates their enthusiasm for what you do than trusting you with some one they know.

The value of advocates

There is an old management cliché that what gets measured gets done. An IFA in Cheshire I met recently maintains records of all the introductions made, the value of those clients is linked to the records of the introducer or Advocate as he calls them.

As he says “It’s not the clients that you transact most business with that is always the most valuable. I have a self employed garage owner who is chairman of the local chamber of trade. Over the last 3 years I have received £1700 in revenue from my dealings with him however he has referred 5 new clients where the combined earnings to date have been £14800 over the same date with a combined funds under management exceeding £1.2m.”

The interesting thing is that he even knows this, as the majority of IF As only “have a feel for that” Who are your main advocates? And what are they really worth?

If you are lucky enough to have advocates how do you recognize them. Do you carry out any good will activity such as the IF As mentioned before do. If you look at everything as a cost rather than an investment you are unlikely to build continual loyalty. There are many ways in which you can enhance their service here are examples I have come across.

· One IFA sends out a personalized diary in November to each advocate with the date of the next meeting noted in the diary with an agenda enclosed. She says that very few appointments are cancelled and starts the year with over half of her diary full.

· Courtesy calls- simple and yet often overlooked, a simple phone call, How are you? Is there anything I can help with? The positive response will far outweigh the small cost.

· Customer satisfaction surveys. Too official I hear you say. Yet an IFA in Nottingham carries them out using the Winterthur Life service and tells me he has an 80% response and always learns something new.

· An IFA in Exeter allocates a budget of 5% of annual earnings from each advocate or top 20 clients. He spends this on Christmas cards, birthday cards for the family, a summer barbeque and other personalized gifts. He assures me that he has never not made a profit out of the investment for each of the last 3 years.

· One IFA in Shrewsbury operates his own loyalty program where clients can bank vouchers for a range of rewards based on their length of time as a client and the number of clients they have referred to him.

So in summary then here are my top 6 tips to increase the level and profitability of referrals. Put your natural cynicism away and remember each of them works, not necessarily in isolation, however combined they WILL produce results.

The Top 6

Always ask, tell your clients you will be asking at the earliest opportunity and help them to identify the kind of people that will most benefit from seeing you.
Always thank them not just in words but deeds, with gifts or an enhanced service, social events , seminars etc.
Differentiate your service in some way; people only consistently refer a service that is exceptional.
Know your Advocates, identify them, measure their value to your business-you may be surprised.
Keep in regular contact- out of sight is out of mind, use surveys courtesy calls etc.
Remember people recommend service not just you the person. Define your service process, document it, measure delivery and stick to it.

I hope you have found this article thought provoking and whilst I am sure many may not agree with some of the points made I hope that by sharing what others have DONE you feel more inclined to try.

A much more comprehensive guide is available by writing to me at I.Thorneycroft@Simplybiz.co.uk

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04/10/2007 - Referrals-the final endorsement