In two previous I discussed seven misconceptions that prevent advisors from getting referrals.  Today I contineu with three more referrals fallacies.

Something that puzzles and frustrates national sales managers of every advisory firm is why more advisors don't ask clients for referrals.

 After all, research  indicates that 85% of investors say that if asked they'd be willing to provide referrals  ... yet less than 15% of advisors ever raise this topic.

This is one of life's great mysteries ... advisors want new clients, know that the best source comes from referrals ... and yet fail to introduce this in conversation. What's going on here?

There are two explanations for this apparent disconnect.

First the notion that 85% of clients would provide a referral if asked by their advisor is simply wrong.

In a column two weeks ago, I wrote that there are two kinds of referrals - the ones that advisors initiate ("Who among the people you know should I talk to?") and the ones  initiated by investors' friends and family ("Do you have an advisor you could recommend?")

Quite simply, when 85% of clients say they'd provide referrals if asked, they're talking about being asked by a friend or work colleague, not their advisor.

But there's a second reason that most advisors don't bring up the topic of referrals ... and that's because many methods that are recommended for talking about referrals are uncomfortable and create stress for both advisors and clients. To make the referral conversation more common, advisors need approaches that are fully professional and comfortable for both parties. 

Here are examples of bad advice that advisors get on referrals ... and what you should be doing instead.

Misconception 8: Ask broad questions

            When it comes to referrals, open ended questions are best

In fact:

From day one, new advisors are trained that open ended questions are good, closed ended questions are bad ... if you want to get an existing or prospective client talking, you need to focus on open ended questions.

And that's generally true ... but not when it comes to referrals.

The good thing about closed ended questions is that they require minimal effort and are easy to answer as a result. .

Let's replay the conversation above in which an advisor is using a Ben Bernanke lunch to trigger an introduction:

"I wonder if someone you work with would like to come along, who might be interested in meeting me and who I should get to know. In the past, you've mentioned your CFO Patricia Barnes. Do you think she'd be interested in attending?"

This question is easy for your client to respond to - the typical reaction you can expect is "Quite possibly, let me check with her."

Suppose instead you'd asked the open ended question: "Who among the people you know might be interested in attending? "  or the slightly narrower  "Who among the people you work with might be interested in attending?"

These questions are harder for clients to answer. By asking a specific closed-ended question, you reduce the effort and stress and increase the likelihood of a positive response.

Misconception 9: Wait to thank clients until referrals sign up  

            You should thank clients when someone they refer becomes a client

In fact:

It goes without saying that every advisor thanks clients when someone they refer becomes a client.

The difficulty is that few advisors have as many opportunities to express these thanks as they'd like.

Instead of focusing on the outcome of a referral, someone becoming a client, consider instead reinforcing the process of the referral being provided.

Smart advisors don't wait for new clients to thank a client who's introduced a friend. One advisor sends clients who provide referrals a thank you note as soon as the referral is received, including a $5 Starbucks coffee card - even before following up with the prospect who's been referred.

Here's what that note looks like:

"A quick note to let you know how much I appreciate your confidence in suggesting to Mary that she give me a call .. we're meeting next week to talk about his situation.

 I'll keep you posted on how things go - in the meantime, thanks again for your confidence

Dan

P.S. Recently, I've begun using Starbucks cards for my morning coffee. I've found them handy and am including one for you ... your next coffee's on me!

Misconception 10: Preserve client confidentiality at all costs

            Once a referral has led to a new client, confidentiality prevents you from keeping the client who             made the referral in the loop on how things are going.

In fact:

It's clear that client confidentiality needs to be paramount. At the same time, there are ways to keep clients who refer someone who becomes a client abreast of what's happened.

One advisor has a disciplined strategy to welcome new clients.

That starts with a clear agreement on frequency of ongoing communication ... let's say an annual meeting supplemented by quarterly calls. He goes on to say that the new client will be hearing from him a bit more initially, to ensure things get off to a good start.

In the first ninety days, there are normally four points of contact:

• One week after signing transfer forms, he calls new clients to ensure they've received follow up documentation in the mail.
• Thirty days out, when clients receive their first statement, he calls again to review this with them and to answer questions.
• At sixty days he calls to check in to answer any questions
• At ninety days, he schedules a 30 minute "check-up meeting", to ensure that everything is on track - this can be at his office or at their place of work or home.

At that point, he does two things.

First, he reminds clients of the ongoing frequency of contact they initially agreed to - and says that they can expect to get a call in 90 days and another meeting will take place in nine months.

And second, at the very start of meeting, he asks clients to complete a short five question report card asking them to rank their satisfaction on clear communication, frequency of contact,  answering questions, addressing any problems and meeting their expectations.

 As you'd expect, he almost always gets top grades. At that point, he tells his new clients that he's delighted they're happy and he's committed to making sure they stay that way ... and asks for permission to share their report card with the person who referred them.

Having received that, he's now in a position to drop clients who made the original referral a short note, thanking them again and telling them that he'd recently met with the people they referred and that their friends had given their permission for him to share a report card on their initial satisfaction.

That note has a powerful impact. The clients who made the original referral feel good about their decision and the risk of future referrals drops dramatically - and the top of mind awareness of referrals goes up sharply. As a result, by doing this and this alone, this advisor often sees further referrals follow.

Next week, I'll wrap up with some final referral tips.