The psychology of referrals - part 1

Since 1986, the common advice for getting referrals is ask for them. It took me years to figure this out - It's wrong. It's bad advice.

In this article I will share some of the research that clearly proves the folly of asking for a referral. Plus, I'll share with you some guidance in developing an approach that is much more effective.

Fact Set #1

The following comes from a 2008 report titled Investor and Industry Perspectives on Investment Advisors and Broker Dealers.

FACT 76% of Investors Found Advisors through Referrals
Regardless of the types of services received, the most common way respondents found their current advisor was by referral from a friend or family member.(45.6%) The second most common way was by a professional referral (30.5%).

FACT Investors seek Attentive, Likeable and Credible Advisors
When asked "What do you like about the services you receive from your advisor" the types of comments most frequently mentioned fell into 3 categories:

1. Accessibility or attentiveness ("she stays up to date on my issues," "is there when I need her")
2. Relationship or personality (he's "personable" or "friendly," "listens, asks good questions, understands my needs")
3. Expertise (she is knowledgeable about " or "knows her business")
   

There are really only two sides to every client relationship --- the personal and the professional. The more important side is the personal. Unless that side is addressed effectively, you could give your clients the impression that you consider them nothing more than a number. And, that number would be their contribution to your income statement.

FACT Investors dislike advisors who fail to keep in contact
When asked why they disliked an advisor, the most common type of comment was in accessibility or attentiveness category ("lack of contact" or "doesn't call me frequently enough"). One other notable negative comment commonly cited refers to the advisor's focus ("I don't think he has my interests at heart." or "He is trying to make money for himself" or "Often tries to sell securities that the brokerage firm is pushing."

Most clients won't call you on it. People are loath to cause stress. They will merely nod and make you think they're in agreement with you. Then, they will log it into their memory and move you from the "referable" category to the "un-referable" category.

FACT Investors are looking for an advisor they can Trust
Trust of the individual financial service professional was the most cited feature of what investors look for in a financial service provider.

Trust of the individual was cited as more important than trust of the firm for which that individual works.Who you are as a person, your personal congruence, is much more valuable to your clients than the firm listed on your business card. Your credibility is the most important asset you have. And, it's the glue that bonds all the other elements together to make you referable - or not.

CONCLUSIONS:
Based on the research provided by this research, we see that most people who are looking for an advisor end up finding the one they hire through a referral from a friend or relative. The people making the referral are feeding new business only to a certain type of advisor --- one who keeps in touch with them, is accessible to them, has demonstrated trustworthiness, and one who has that client's best interest at heart. In our world, we call that Credibility because it effectively and successfully covers both the personal side and professional side.

With that in mind, my prescription to you is to create an effective system for keeping in touch with your clients, at least with your best clients. Mix your contacts with personal visits, lunches, small gifts and greeting cards.

Approach these touches personally. Think of it as individual communication or one-to-one marketing. If you can make those personal communications relevant to each person, you will have taken your first step into the realm of "Credibility Marketing."