SALES AND MARKETING
GETTING REFERRALS
Lessons Learned
The current financial turmoil offers valuable lessons for generating referrals.
Martin R. Baird
As Congress grappled
with problems in our
financial system, I attended
a broker-dealer conference
in Florida and walked away
with new insights on referral generation.
Referrals were not the
topic of discussion at this
conference, but as I heard
reports on the state of our
financial system, Washington’s slow response and
the possible consequences
of waiting too long to act,
I couldn’t help but think
of advisors’ heavy reliance
on referrals to build their
business. Regardless of how
things turn out for our financial markets, I believe
the turmoil offered timeless lessons.
The mistakes that led our country
into a financial mess are the same mistakes many financial professionals make
when it comes to generating more referrals. There are three of them.
1. Having no skin in the game. Some
conference presenters felt that much of
the financial turmoil was caused by no
one owning the mortgage deals at the root
of the problem. Loan officers had no risk
when arranging shaky mortgages because
they got paid whether or not homeowners
defaulted. The bank or mortgage company also had no skin in the game, presenters said, because they would soon sell the
bad mortgages in the securities market
and move on to the next deal. There was
no risk for key players involved.
But when it comes to advisors getting referrals, there is one person who
simply must have skin in the game: the
client making the referral. Otherwise, it
WHEN IT COMES TO ADVISORS GETTING
REFERRALS, THERE IS ONE PERSON WHO SIMPLY
MUST HAVE SKIN IN THE GAME: THE CLIENT
MAKING THE REFERRAL.
means nothing when a client indicates he
would be willing to make a referral. Typically, an advisor attempts to determine if
the client is satisfied and, if he is, whether
he could make a referral. I imagine many
clients tell advisors they are satisfied or
even extremely satisfied when taking a
survey or responding to a direct question. So why aren’t the referrals pouring
in? Because saying he is satisfied carries
no risk, and he is not likely to act on that
statement and make a referral.
The referral floodgates are closed because advisors do not measure clients’
willingness to risk something extreme-
ly important to them—their reputation.
Ask a client if he is willing to risk his
good reputation and recommend you to a
friend, relative or associate. If the answer
is yes, you know your client is willing to
take on a high level of risk, i.e., put skin in
the game. Focus on clients willing to assume that risk because they are the most
likely to make referrals.
2. Delaying action. There was no
lack of complaints at the conference that
Washington didn’t move quickly to stem
the tide of the looming financial mess. Indeed, I remember a television interview
several months ago in which someone
