When you are under the weather and are looking for a good doctor, you are most likely to ask your friends/family members for a reference. After getting diagnosed and taking prescription, the doctor does not ask you for a referral. If we like the doctor, we would unhesitatingly provide a referral to anyone who is in need.
The same goes for advice on financial matters. You would want to check with your family and friends for seeking advice from a trusted financial adviser.
Referrals are one of the primary sources of acquiring clients for advisers. Unsolicited referral prospects are easy to convert since they have been provided by your existing clients who have experienced your services and trust you.
But should referrals be solicited? Asking referral is not easy. You need to have the right pitch and it should not come across as salesy. This is why some experts suggest that advisers should refrain from soliciting referrals. Author of Stop Asking for Referrals, Stephen Wershing says, “Referrals should be unsolicited. In most cultures (Japan, for example, is a notable exception) when a friend is in need of something we try to come up with suggestions of people or companies they might contact to find what they’re looking for. We do it automatically and instinctively. If you solicit a referral, it means that you have not positioned yourself well enough as a solution for clients to remember to recommend you at the right time, describing something about you that is compelling.”
But the rule is not etched in stone. Some advisers are very successful in seeking referrals but for others it can backfire. It depends on how good your relationship is with the client. Advisers agree that there is no harm in asking for referral provided you communicate it well. “Asking referral can also serve as a checkpoint of the health of an engagement. If we were to ask a client for a referral, we would simply say something like this - 'We need your help. We are looking to add a few clients. Do you think any of your friends would see a value in what we have been doing?” suggests Rohit Shah of Getting You Rich.
Why do some advisers do not ask for referrals? There could be two reasons. Firstly, they are not confident about themselves and whether they will be able to live up to client expectations. Also, negative experiences of existing clients deter advisers from seeking referrals. “Asking a referral when the client's value perception is poor or when a disconnect exists between us could lead to a difficult situation. The referrals work only when the existing client segmentation is correct,” observes Rohit.
Secondly, some advisers don’t like being pushy, so they don’t make an effort. They know that clients will automatically refer them since they are getting the best.
Viksit Rohatgi of Blue Circle Financial Services says that advisers need to establish a close connect with the family and should have displayed high professional skills to earn referrals. “You should be perceived as a ‘family member’. This way you would have already met their friends and family. You do not have to make any extra ordinary pitch. Only soft gestures to the prospect like "when do we meet" should work,” says Viksit.
A rule of thumb when you get a lead from existing client. For instance, referred clients might have unreasonably high expectations from you. So clear communication is essential. “At times the referral takes very high note of the adviser since he has been "highly recommended" and the expectations from the adviser are accordingly raised higher. In such cases, the adviser should very skillfully deal with such a situation to bring down any unreasonable expectations by clearly defining the role, scope, aspect, nature of services and responsibilities,” cautions Viksit.
Start up advisers have no choice but to cold call. Generally, it takes a good amount of time before existing clients start trusting you and voluntarily provide referrals. Thus, advisers need to cultivate their existing relations well to ensure they get the best service. Referral is a byproduct. “We already have a very healthy flow of voluntary referrals. Spending adequate time with clients and attempting the engagement value from their point of view in most cases results in referrals over a period of time. We don't expect any referral in the first three years of engagement,” says Rohit.
Since many clients would have had some bad experience either with the product or the industry as a whole, advisers may find it difficult to ask for referral. If you are not getting referrals voluntarily, you would do well to reinvent yourself by enhancing professional skills, improve services, setting expectations right and work on deepening relations before asking for referrals.
