You're not alone. More than half of all new clients of financial advisors come from active and passive referrals according to studies of advisor best practices. Your current clients are, in effect, you best source of new clients. Helping your clients become better at "selling" you to their friends, family members and associates is not as difficult as it may appear at first blush.
The first step in the process is measuring your referability; and once measured, how to improve your referability and proactively receive more referrals?
So how do you know if you are referable? It is a common practice to measure client satisfaction among broker-dealers. Did you know that high client satisfaction scores have absolutely no correlation on predicting business growth according to studies of client satisfaction scores done by the Bain Organization? Surprised? Well those same studies revealed what does predict future business growth.
In all of those surveys there was one question that accurately predicted future business growth. According to Fred Reichfeld, author of The Ultimate Question, that question is: How likely are you to recommend us to your friends and associates?
Pretty obvious isn't it? If people aren't willing to recommend you then something is wrong. In every industry studied, companies with high scores using the "ultimate question" were the leading companies in the industry. This score is called your net promoter score. I have seen advisors get more referrals simply from conducting the survey. For more information and a sample survey, you can email me.
Once you measure your referability the next step is to attempt to improve your score and then measure it again. Clients who will readily refer you are called loyal or engaged clients, a step above merely satisfied clients.
The key to improving customer engagement, according to the Gallup Organization, is to improve the client's emotional experience each time they interact with the company's service provider. In a financial planning practice that interaction is provided by you and your staff. The goal of each interaction is to deepen the client's emotional connection with your practice, says Gallup. In a study of a large retail bank, "emotionally satisfied" customers increased their spending 67% over 12 months compared with just 8% for the satisfied group.
In order to create that emotional connection your staff needs to be emotionally engaged. To measure and improve your staff's emotional engagement I recommend using the Psychological Capital (PsyCap) survey. PsyCap is a measure of emotions directly related to work performance and improvements.
According to researcher Fred Luthans Ph.D., who authored the book, Psychological Capital, there are four factors that characterize this positive psychological state: 1) self-efficacy or self-confidence in the ability to complete a task; 2) optimism about succeeding at a task now and in the future; 3) hope and 4) resilience in handling setbacks, failure or change.
In PsyCap terms, as little as 1% or 2% of an increase in the emotional engagement of your staff has shown a return on investment of as much as 271% in scientific studies. For more information about PsyCap you can email me as well.
The results of conducting your net promoter score survey will give you a road map of what you need to change to become more referable. Regularly measuring and taking steps to improve your staff's PsyCap will be key to improving your overall client experience. Now that you have set the table let's discuss some proactive steps to take to help clients become your best salespeople.
I mentioned earlier that more than half of all new clients for advisors come by active and passive referrals. Thirty-six percent of those referrals are passive, meaning you just wait for the phone to ring.
Twenty percent of those referrals were active, meaning someone asked for a referral. Guess which one gives you more control and is being ignored by 80% of all advisors? Active!
If referrals account for more than half of all new clients you better become active. No amount of asking will get you referrals if you are simply not referable. Improvements in your net promoter score will make you more referable, but you still need to ask. I recommend either printing out the client's connections from LinkedIn and identifying who you would like to meet or simply using the recommendation script below:
"I am considering making some changes to my practice, would it be okay to get your opinion about some changes I am considering? (If yes, proceed.)
"I am considering working with more people like you, people who are: (insert niche such as retired, live in this area, work in this industry, etc.).
"What is your opinion of this idea? (If favorable, then ask). If you were me how would you get started?"
That script is very low key. You are asking for advice but the client is advising you on exactly what you need to do to get more referrals and will usually volunteer to help. You should test this script as written first and then edit if necessary.
Finally only 20% of advisors actively use the best client acquisition system available: referral marketing. And I gave you two systems in case you are among the 80% of advisors depending only on passive referrals. Passive referrals are great but you need to use both passive and active referral systems.
Todd Colbeck is principal and founder of the Colbeck Coaching
Group, a subsidiary of General Business Center, Inc.
You can reach him at this email address.