Getting referrals from your top clients

Everyone knows a “guy” or has a “guy.” And we all take great pride in recommending our “guy” to anyone who will listen. I have several “guys” and a few “girls” of my own.

There’s my restaurant guy who I recommend to all my out-of-town clients:.“Go to Tony’s,” I always say. “He’ll take care of you.” There’s my suit guy, who has a great product that sells itself, but I love telling my friends about him anyway. And of course, there’s my trainer girl, who I would recommend to anyone, even though she’s still trying to develop her product (me).

If advisors were granted one wish, I bet they would wish to be known as the “investment advice guy” or the “financial planning girl” that their clients refer to their family, friends and associates. When it comes to effective prospecting, seminars, advertisements and cold-calling all have their strengths, but nothing beats a referral from an influential client.

The importance of referrals

When making important decisions, we usually get input from friends, family members or co-workers. When we need specialized advice or services, we usually get a referral to a professional by someone we trust. . Most of us wouldn’t flip through the Yellow Pages or respond to an ad in the local paper to find a heart specialist to do our first bypass or get our hip replaced – I’m not making that mistake twice. We ask someone we know, who has had a successful heart operation or hip replacement surgery, for his or her opinion.

Successful businesses don’t need to advertise, their clients do it for them. Think of the last time you went to a restaurant. If the service was lousy and there was a strand of hair in your food, you probably didn’t recommend the place to your friends. But if the atmosphere was cool, the food great and the staff friendly, you’d tell anyone who’d listen. Clients only refer friends, family members, co-workers and acquaintances to you when they trust you’ll take good care of their referral, and in essence, their reputation.

94% of revenue comes from existing client base

So, how do top advisors turn their businesses into referral machines? You can look in the mirror like Robert DeNiro from Taxi Driver and repeatedly say “Are you referring to me?! Are you referring to me?” to pump yourself up before each client meeting, or you could develop a strategy.

The first thing to remember in any business is to know where your revenue is coming from and protect it. At Russell Investments, we conducted a survey to understand where advisors’ revenues, on average, were coming from year to year. We looked at advisors’ revenues on January 1, 2006 and compared that with December 31, 2006. We found 80% of advisors’ revenues on December 31 came from the clients they had on January 1. Another 14% of the revenue came from referrals from those same clients. Only 6% of the revenue on December 31 came from other sources. In a nutshell: On average, 94% of revenue comes from your existing client base.

Become known as a specialist

When we get stuck or plateau at a certain revenue level and want to grow, the tendency is to spend some money and do some advertising, send out mail or organize a seminar. “Stay active and clients will come” is the common mantra. For some, these strategies are effective, but most of us see very little new business and are a little poorer from the experience – but at least we get to see our face on a bus shelter.

Advertising and cold-calling new prospects is all well and good, but your product is what counts and your client base can be your best sales force. You’ll need to elevate your product to ensure your clients rave about you to colleagues, family members and friends. And the best way to elevate your practice is to become known as a specialist. Most of us believe we have to take a “spray and pray” approach to prospecting for new clients. We think, “There are just not enough doctors, business owners and high income earners in my community for me to focus on any one category.” For most advisors this is simply not true. Try going to http://www.infocanada.ca/Business/geography.aspx and see how many specialists are in your area. These people may already be a lucrative revenue source in your book. If they are, meet with them and do some deep fact finding to truly understand their needs. Read an industry magazine or, if you’re really social, go to a conference or two and talk to people in the industry.

Getting to know your top clients’ industry, lingo and business concerns can be just as important as knowing their investment goals. In the client focus groups Russell has conducted, we most often found that the clients who are most happy with their advisors are the ones who are the most similar to their advisors. For example, young clients with families like young advisors with families. More aggressive investors who thrive on risk tend to like the more transactional advisors. Ultimately, clients want someone who understands them. Therefore, you need to become an expert in the market you’re trying to serve.

I like to use the example of one advisor who chose to focus her attention on a very specific part of the entrepreneurial landscape. She believes the single most important service she can provide her clients is preparing them for the sale of their business.

Entrepreneurs have three main transition options:

• 1) do nothing;
• 2) transition business to the next generation; or
• 3) sell the business.

In her experience, most entrepreneurs do nothing, which is the most destructive to their wealth. No planning is usually accompanied by a forced sale of the business, tax and estate issues to name just a few, none of which are best served quickly. Then, there is option two: Transfer the business to the next generation. But do the children or other family members have the same drive as the creator of the business? If there is more than one potential candidate to take over the business will the loser still play nice? The best option is planning a sale in the open market to the highest bidder at the right time.

The advisor made herself an expert in dealing with these issues and became known as a specialist in creating individual pension plans (IPPs) for business owner. Many of the HNW professionals you want in your book are entrepreneurs who will face a similar dilemma. Imagine helping one of them and getting constantly referred as “the advisor who’s great at IPPs” for a specific industry.

Imagine that over the next five years you were to work primarily within a target market and gain clarity on all the things your clients needed to do, not just regarding their investment goals but also within their businesses. During this time you help them organize and properly plan their entire wealth strategy. And by working with that target market, you’re able to find a buyer from within your client base when another client is ready to sell. Think of the wealth you could create for your clients in good markets or bad and the profitability and vibrancy of your own business.

I have talked to advisors across Canada who have become known as “the investment advisor guy (or girl)” for various industries. One advisor has more than 50% of his revenue coming from greenhouse owners in southern B.C and Ontario. Another focuses on mining towns and mining companies across Manitoba. There’s an advisor in Alberta who caters to drillers. I know of another advisor who has become the “guy” for clients returning to Canada from the U.S.

The road map to referrals

It’s not only important to understand your target market, you must also make sure your clients and prospects know about your specialization. I recommend that for all your top clients and prospects, you have a goals document and a road map in place. After your initial fact-finding exercise with new prospects, summarize everything they said to you in a simple one-page document and send it to them. Ask them to confirm that you’ve captured the relative importance of all their goals.

This document shows your clients that you listened deeply to what they said. You can also use it during planning sessions to ensure you’re giving priority to the right issues. Set a roadmap that outlines the next two years and how you’re going to help them accomplish their goals. Through the road map, they’ll see the attention to detail you have given them and they’ll also realize the deep understanding that you have of their industry and situation. It’s the first step in building the trust that will hopefully lead to more referrals. It also wouldn’t hurt to recommend them to a good restaurant.