Why asking for referrals is not a good strategy

By Ravi Samalad |  13-01-20 | 
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About the Author
Ravi Samalad is Assistant Manager - Editoral for Morningstar.in.

In this second and concluding part of the interview, Robert K. Huebscher, Founder and CEO of Advisor Perspectives talks about why having a business plan is necessary, shares tips on using social media and more.

Read the first part of the interview here.

Should advisers have a business plan?

Advisers should have a clear vision of what their target niche is, what is unique about their value proposition and how they will be serving that niche and their strategy for growth. Is it referrals, marketing through social media or centres of influence? They have to draw up a plan on their financial metrics like fee structure, how many clients they will acquire in a given time period, their expenses, etc.

My anecdotal experience suggests that most profitable advisers approach their advisory practice as a business. They deploy all technical skills of financial planning and investment management.

Should business plan be static or dynamic?

It should be dynamic. A business plan shouldn’t be dependent on the market environment because you want to insulate your clients from the volatility and the changes in the market dynamics. It should be dynamic in respect to changing client demographics, changing goals, and the new technology that emerges.

How should advisers use social media as a brand and customer acquisition tool?

There are regulations around advertising for advisers in U.S. They are not allowed to show testimonials and cannot accept endorsements.

The single largest source of acquiring clients organically (excluding mergers and acquisitions) is through referrals from existing clients and employees.

But for an adviser who has just started out, social media can be one way to acquire clients. The way to succeed is to be creative and innovative. Don’t copy what other advisers are doing. Videos are more likely to get traction on social media. Try to be helpful and resourceful to people in a non-sales approach.

LinkedIn has become an effective platform which connects clients and advisers. It has proven to have greatest success. It is probably not tapped nearly to the extent that it should be by advisers. You Tube is another good platform for advisers to distinguish themselves. But it is more challenging to make a video. You have to shoot a video professionally. If you shoot a video with your mobile phone in your living room you are not going to come across as the type of professional that someone is going to invest million dollars with. Budding advisers can first start networking through local organisations like chamber of commerce or local community where businessmen meet.

Should referrals be solicited?

To simply ask someone to refer their friends or associates is generally not a good strategy. The effective way to do is to conduct social events where they invite their clients and their friends. If you organise an event that is going to be fun and entertaining and clearly not a sales pitch, you are likely to get referrals. I have seen this with wine tasting events or cooking lessons. It has to be something that is going to resonate with a reasonably large segment of people and not come across as a sales pitch.

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