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Blogs - Advisor Intel
3 Step Process for Client Referrals
Thursday, April 18, 2013

Most advisors recognize the value of referrals, but few seem to understand the psychology and the processes that promote referrals. Most often, both parties in a referral situation measure the success of the referral process by the outcome: If the prospect becomes a client, the referral was successful. Advisors need to understand that the most important part of a referral is the behavior. It’s the referring behavior – not the outcome of the referral – that you want to promote and reward. It’s more important to focus on the process than on the result to improve the quantity and quality of referrals you receive.

The three-step referral process for clients is designed to enhance the role and value of your clients in the referral process. Each step has a specific goal to help promote and reward the referral behavior.

Step 1: Recognition

The first step is a brief telephone call to tell a referring client how much you appreciate the referral. For example, sayt:

  • You are touched by his or her confidence.
  • You will give the referral your immediate attention.
  • You will do your best for the referral.

In addition, to show your appreciation to clients for their confidence in referring someone to your firm, send an appropriate gift. Gifts that show knowledge of your clients’ tastes and interests are the best relationship builders, while sending such gifts to their business address may make the gift more visible and provide them with the opportunity to explain why they received the gift and from whom they received it.

One of the more common mistakes advisors make is not doing enough to reward the referral behavior of their clients. Making a referral, particularly the first referral, is not common behavior and thus should be highly recognized and rewarded to encourage positive feelings and repetition of the behavior.

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 Many advisors send a thank-you note if the prospect doesn’t become a client and will send a thank-you gift only if the prospect becomes a client. Again, this implies that the result of the referral is more important than the referral behavior. Making a referral, particularly the first time, requires clients (and professional referral sources) to extend themselves beyond their comfort zone and place tremendous confidence in you. Your resulting actions should at least equal that effort.

To the degree allowable, reward client referrals regardless of the outcome of the referral. Some tips are:

  • Send a unique/interesting client gift on receiving a referral, even if the referral isn’t a good fit. We’ve found that Sherri’s Berries (chocolate-covered strawberries) always seem to go over well and are within the available allowance. There is no lack of ideas available by doing some research on the Web.
  • One firm sends an apple pie or a chocolate cake (depending on client preference) with every referral. This makes the activity memorable and enjoyable for clients and seems to keep generating more referrals.
  • One firm has Tiffany boxes with small gifts, such as key chains or small vases, on a table at its annual client event. At the end of the evening, the principal calls up clients who have made referrals during the year and hands them each a Tiffany box. Interestingly, clients are always looking for referrals so they can get the Tiffany box next year.
  • One firm sends two sets of golf balls with its logo to clients who golf, with a note that they can keep one set and pass one on to the next referral.
  • One firm gives clients wine goblets with their initials engraved, with a note about how great it will be to complete the set.

There is no end to the ideas for rewarding referral sources; just be open minded and creative.

Step 2: Enhancement

Enhance your relationship with the client referral source by encouraging referral behavior. Draft a hand-written thank you note . Use the talking points identified in Step 1: touched by their confidence, you will do your utmost for the prospect.

If you have scheduled a meeting with the referral, let your client know because this will reflect positively on you and the process. Even more important, if the referral was not a good fit for your firm, the “enhancement” call provides the perfect opportunity for you to educate your client on whom he or she should be referring.

Step 3: Follow-Up

Proactively communicating the outcome to your client, prior to the prospect’s doing so, has important relationship implications. If you are not the one to share with the client the outcome of the referral, the prospect undoubtedly will.

If the prospect chose not to work with you or you with them, and you are not the first to share this information with your client, it will not likely reflect positively on you and may ultimately harm your relationship with the client. In addition, openly communicating with your clients why a prospect was not an appropriate fit gives you an additional opportunity to share your value proposition and target client profile. In this way, you will be further reinforcing your value to the client while teaching him or her with whom you do your best work.

Matt Matrisian is senior vice president & director of practice management at Genworth Financial Wealth Management. He is also the author of The Power of Practice Management, which the above blog is exceprted from.

(3) Comments
Excellent article, particularly the concept of rewarding the referral behavior and not just the referral outcome. Should be on the required reading list for all professional who depend on referrals.
Posted by David C | Thursday, April 18 2013 at 1:53PM ET
Outstanding article. Rewarding your referral source can also be a great way to enhance your marketing. The gift (if appropriate) is a heck of a lot more than others are sending your referrer so you immediately stand out. But if they work in an office environment you can get more bang for your buck if you send the gift to the office for others to see. If this is the case and you can send it to their office make the effort of sending something that makes a lot of visual noise. It might be a big gift basket with tons of cellophane, or a large box of cupcakes, candies or other food items that the referrer would have a tendency to share with others. When a coworker walks by and says "Hey where did you get the candy" Your referrer may say "My Advisor sent them to me because I sent him/her a referral." "Really who is your advisor? I've been thinking of making a change"...voila!
Posted by Adri M | Friday, April 19 2013 at 5:22PM ET
An eye opener article, i truly feel that rewarding your referral source is the best way to enhance marketing skills.
Posted by Kimmy B | Friday, October 04 2013 at 2:20AM ET
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