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The Practice Doctor is IN
The Tip of the Referral Iceberg
The situation is a common one. Bill, the advisor, is summing up at the end of a meeting with Carl, a client. Perhaps it’s an annual review, a closing appointment, a plan presentation, or a service call. There is a sense of completion, and Carl is ready to move on to other things in his day.
There is an uncomfortable pause. Bill isn’t quite finished.
“Carl, before I go, I wanted to ask if you’ve been satisfied with the products and services we’ve been discussing and implementing.”
“Certainly, Bill,” he says, shifting uncomfortably in his chair.
“That’s great. As you know, my main source of new clients is through the referral process. Nothing beats a personal recommendation,” Bill smiles.
“I see,” Carl says, thinking how to end this quickly.
“Who do you know who might benefit from my services?” Bill’s question is more like a statement.
Carl seems to ponder this, looking up at the ceiling. Bill is patient in his silence.
Carl finally speaks. “No one comes to mind right now, but I’ll keep you in mind. Do you have any business cards I can hand out?”
Ball back in his court, Bill fumbles in his pocket.
“Certainly. Here are a few. I appreciate your help.” Carl accepts the cards and puts them into his jacket pocket. Bill rises and they shake hands. Both men depart, feeling relief.
Another “asking for referrals” event is over.
What’s wrong with this picture?
Primarily, of course, no names were gathered. Maybe Bill left the appointment feeling that he had “planted some seeds” for future referrals. Carl felt he had dodged a bullet; after carrying around the business cards for a few days, he would stash them into a drawer that seldom gets opened.
The reality is that the referral process goes far deeper than this brief encounter. What we just witnessed––the actual asking for the names––is just the tip of the referral iceberg. My best-practices research suggests that there are considerations that need to be addressed prior to a true referral experience. These findings are summarized in the advisor’s ability to answer four key questions:
Let’s dig in to these questions. We’ll cover the first two this month, and the next two in May’s column.
1. Is there even a remote chance this client will give me a referral?
Bill needs to determine Carl’s referral history. Has he had negative, neutral, or positive experiences? Perhaps Carl has been burned by the process in the past and will never provide a referral again. Knowing this would save everyone a lot of time. Carl would then need to be brought around gradually, over a long period of time, if ever. On the other hand, if Carl has had neutral or positive experiences with referrals, the outlook is brighter.
A simple question can be asked at an appropriate time during a meeting with Carl. “Carl, my primary marketing tool is word-of-mouth introductions. This means I rely on good clients like you to spread the word and promote me and what I do. If you don’t mind, could you tell me about your past experience in referring professionals to people that you know personally and through work?” Allow the client to vent, if necessary. Giving them an opportunity to speak about referrals is a powerful step towards actually getting names.
2. What’s the client thinking when I broach the topic of referrals?
Primarily, the client is weighing the impact you will have on their relationships. Most people have three levels of relationships. The A level relationships are the most intimate and critical to the client, personally and/or professionally. B level relationships are important, but not as intimate. C level relationships are more like acquaintances.
As Carl is looking at Bill, he is subconsciously deciding if it’s worth risking relationships to introduce him to people he knows. Bill can have one of three levels of impact on a relationship. He can enhance it, have a neutral effect, or disrupt it.
An enhanced relationship is one in which the referred person thanks Carl for introducing Bill into his or her life. A neutral effect has the referral understanding why Carl provided the introduction, but is not interested. Bill is gently rebuffed; no harm done. A disrupted relationship is one where the referral calls Carl up the next day and demands to know, “Why did you unleash an insurance agent on me?”
If Carl is not confident in how Bill will treat the relationship, there is no way he will provide an A or B level person as a referral. Perhaps he will offer a C level person to Bill since he’s not too concerned about ruining that relationship; if Bill makes that C relationship stronger, all the better.
Carl would be much more likely to refer an A or a B prospect if he was sure Bill’s contact would result in a call thanking him for the introduction.
The relationship issue is a primary concern to Carl. Word-of-mouth is so much simpler when the stakes are not so high. Carl would have little trouble referring Bill if Bill was offering a hot product sure to save a friend some money or had an inside scoop on some stock strategy. The more transactional the perceived value of Bill’s offering, the easier the referral. Many advisors allow themselves to slip into a transactional mode when asking for referrals.
Newer advisors will often use language similar to this: “I know I can save the people you know some money with the products we offer. Who can you think of that would like to look into saving some money?” Or, “Our portfolio analysts are the best. Do you know anyone who would appreciate a fresh look at comparing investment managers?”
These tracks pull the referral process into the transaction realm. The net result is that the advisor falls into the stereotypical higher-pressure referral-jockey trap of the old insurance days.
Those days are gone. Your client may still have this old-school baggage about referrals. The worst thing you can do is pander to it, ensuring a future of nothing but C quality name-gathering.
In short, you need to direct your client’s mindset from product/transaction to you and your relationship. Are you up to it?
Next month: Are you refer-able? What value are you bringing that’s so refer-able?
Until then, the Doctor is OUT.
Al Depman , CLU, ChFC, CMFC, BH, a.k.a. “The Practice Doctor”, is mitchanthony.com’s Business Practice Consultant. He is the creator of “The Practice Management Assessment” tool and materials and has authored numerous articles in professional publications on practice management. Al combined his Liberal Arts studies with 10 years of management experience with McDonald’s Corporation to enter the financial services world 22 years ago. Since then, Al has evolved from an MDRT-level sales rep into a full-time consultant specializing in helping others engineer their business practices to the next level. Contact him at al@mitchanthony.com . © 2008 Al Depman |
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Al Depman, CLU ChFC CMFC BH |
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