This post by Amar Pandit, CFA, CFP, founder of HappynessFactory.in was first published on happyrichadvisor.com.
Ask any wealth management/financial planning firm globally about their most important source of growth and you are likely to get only 1 answer – Referrals. Yes, I know there are other Marketing tactics too, but everyone will agree getting Referrals successfully is an important part of any firm’s growth strategy. Now ask the next question “Do you have a written referral strategy?” and you are likely to get blank stares. “Is there something like a written referral strategy and plan?” There absolutely is and the most successful ones have cracked this formula.
Before we go further, you must understand this insightful point. The first and foremost criteria for you to be referred is to become referable.
Ask yourself “Are you really referable? Are you this outstanding that the client sees wow or that you can help many people just like him/her?” Think about this carefully because no matter what tactic you employ, you must first become referable to expect consistent referrals.
I will go with the point that you are indeed referable but there are many people who are referable yet do not manage to get referrals. This brings me to the 2 biggest issues with Referrals.
- You get too few referrals.
- You get too many referrals (Yes you read it right…too many referrals)
Every firm implements referrals in very different and sub optimal ways. What do I mean by this?
Imagine this: You are watching Virat Kohli playing a T-20 and he smashes a six. You watch this several times. Some of you might even know how to play cricket (well). Does that mean you will be able to hit a six like Virat Kohli? No, you will not. Even when you take a bat and swing 100 times, you might be lucky to get 1 six when the ball is bowled at 145 km/hour.
This is exactly what happens with most Referral Plans (I know there is no written plan). You have seen it work for others or you might have attended /read a column that says it works and you go on to implement such an important growth tactic without sufficient preparation.
It is easy for you to understand that getting too few referrals is a problem but why getting many referrals is a problem. Let us understand this with an example of Ashish Nagpal’s (an IFA from Delhi) firm. His firm was attracting too many referrals and it seemed like things were working. However, the impact was not seen on his top line or any line. So, we took a deeper look into what was happening.
We saw that Ashish was getting a lot of non-ideal client referrals. He was wasting a lot of time calling, talking, and meeting a lot of people that did not move the growth needle for him at all. His conversion rate from these referrals was less than 5%. He was meeting 20 people to get 1 ideal client and most of the time even the 1 client that he signed up was not ideal. In 3 months, he had met 100 people and converted 4. He was working extremely hard (very good), was very busy (good) but not productive (sub optimal) at all. On top of this, he was feeling frustrated with all the rejections and felt there had to be a better way out. He had understood that there was something wrong and he had to do something.
We then went over what he was doing to get the referrals and realized the mistakes. One of the mistakes was that he had not defined an ideal client profile himself, so his clients had no clue who to refer, and most importantly when to refer. He was good and comfortable at asking for referrals and he was getting names from his clients. He had not clearly articulated to his client who he was best suited to help, or who he was looking to onboard as clients (and who he would not). There were many other problems in his way of going about referrals and we identified the key mistakes.
We then created a written Referral Strategy that consisted of the following:
- Referral Goals (Quantified Goals)
- Who would he ask?
- How would he ask?
- What is the process once he got the names? (to protect your time and make sure that you have got the right ones)
- How often would he implement this?
- Who was responsible for this within his firm? (I can bet in most firms, there is no single person who is accountable for an important metric and tactic like this)
- How would they measure success?
This strategy worked (like it always does) after consistent application and now he gets regular meaningful referrals from his clients and even prospects. Just imagine the power of doing it right (more ideal clients, significant growth in business, more time to invest in high value activities etc.).
There are many nuances in implementing a world class strategy and I can write several columns on just this topic of implementation (some other time).
I end this post with the thought of being referable (remember I started this post with this point too). It’s so important and foundational that Jeff Bezos said “We see our customers as invited guests to a party. We are the hosts. It’s our job every day to make every important aspect of the Customer Experience a little bit better”.
Our clients and prospects are the most important source of referrals for us. Thus, delivering a wow Client Experience to them will lay the foundation of success of your Referral Plan (The next thing is to have a solid written referral plan that you can implement, measure and course correct).
