Lessons From the Dow Jones Man-on-the-Street Referral Survey

A recent video blog post demonstrates why target marketing is so important.

Veronica Dagher of Dow Jones recently posted a video in which she asks passersby on a Manhattan street what would cause them to make a referral to their financial advisor.  Some sample questions and answers include "What do you like best about your advisor?" "He gives me thoughtful ideas."

"What could your advisor do to improve his service?" "Focus on what I need and my objectives."

"What does it take to get a referral?” "The confidence that they will continue to do a good job for whoever I referred over." "They would have to do a good job throughout the market cycle."

Does it strike you that any of these people come off as particularly enthusiastic about making referrals to their financial advisor? It doesn't come across to me like that. Notice, for example, they answer the hypothetical question “What would it take for your advisor to get a referral” rather than responding “I give my advisor referrals, and this is why.”

My conviction is that the key to being referable is to provide a specific set of services tailored to the needs of a well defined target market. What is the trigger phrase that would get any of the subjects of this survey to tell someone about their advisor? Would one of their friends have to say "I wish I could find a financial advisor who will do a good job for me through the market cycle?" People don't talk like that!

If you have carefully and specifically defined your ideal client and tailored your services to the needs of that group, and that client was interviewed by Veronica, I can envision their response to the referral question to be something like "oh I do provide referrals to my advisor. He works with people exactly like me, and understands the particular things I need. So, when I hear a friend like me talk about their challenges with money, I always pass his name along."

If Veronica buttonholed your clients and asked about you, what would they say? Would it be "he listens to me and does a good job." Or, would it be "he knows me. He specializes in people like me." And which do you think would get you more referrals?

Steve Talks Referral Marketing on RegisteredRep TV!

I was at the Tiburon CEO Summit in New York week before last, and briefly visited with David Armstrong, Managing Editor of Registered Rep magazine. In this interview posted on the RegisteredRep website, we discuss a little about what is wrong with asking for referrals, and how to have a more productive approach to attracting clients through referral. I hope you enjoy this three minute segment!

Reason #27 To Get Client Feedback – Your Clients Don't Like "Fee-Based”

Advisors who don't seek client feedback don't know what their clients want, they know what the advisor thinks they should want.

We all know that fiduciary is better than broker, and so naturally our clients would give us referrals because we are fee-based and not commission-based, right? Of course. And that's why it's a great idea to attract clients by talking about how we charge fees.

Well, that makes a lot of sense to most of us because we tend to talk about our marketing with other people in the industry and not with our clients and prospective clients. As it turns out, clients don't like fees and they don't like to be reminded of those fees. So, when Sullivan and Northstar surveyed investors on their reactions to different words we use in our marketing, for the 2012 update in their "Rebuilding Investor Trust" series, they found that 64% of respondents had a negative reaction to the phrase "fee-based."

Since fiduciary is clearly better for clients, you might also be surprised to learn that in a survey done last year by Cerulli Associates, about 47% of 7800 households surveyed preferred paying commissions compared with 27% that would rather pay a fee based on assets.

Of course, if you had asked your client advisory board to evaluate your marketing you probably would have heard about this already. Who better than your best clients to help you understand the most important messages to communicate in your marketing? This is the group with the clearest idea of what is most valuable about what you do, and their language for describing it probably differs from yours. It is possible that your clients consider the fact that you are "fee-based" to be one of the more important things that distinguish you from other advisors, but I suspect they will talk more about what you do for them rather than how they pay you.

One of the biggest mistakes we make in marketing our practices is to dream up what we will promote and what we will emphasize without input of the people we are hoping to attract. Engage your clients in an ongoing conversation about your value, and you will find you have a much clearer idea of what to say to attract more clients like them. And you can work together to develop what they can say to other people to get you referrals.

To Get Your Clients Referring, Teach Them the Trigger Phrases

The new referral conversation is about interacting with our clients the way friends would interact with each other or enlist their help in problem-solving. Whatever approach we take, it should be a conversation that delivers benefits to the client.

One aspect of the new referral conversation is that it can naturally grow out of educating the client. You have worked hard to determine who your ideal client is, what problems they have, and what kinds of solutions or experiences they seek. Ideally, you would have reviewed your service mix and made some adjustments to more closely tailor it to that ideal client. So, the natural place for the new referral conversation to begin is in describing the problem you have decided to focus on solving or the need you have determined to fill. By extension, you will be drawing a picture for your clients of your ideal prospect. Our objective is to identify and reinforce expressions the client may hear that we hope will prompt him to mention you. We want to be teaching the client how to know who a great referral would be.

In The Referral Engine, John Jantsch says “I believe any salesperson worth their salt has developed a list of phrases, situations, and verbal clues that, if heard during a sales presentation, signal it’s time to take the order. The same idea is true of a qualified referral.”

What are your trigger phrases?

• ·         I was just awarded another allocation of stock options, and I'm not sure exactly what they can do for me.
• ·         Our company just moved to a cash balance retirement plan.
• ·         My best friends husband was just diagnosed with Alzheimer's.
• ·         We went to my son's high school last night to you the guidance counselor talk about financial aid.
• ·         My sister just had her first child.

Take some time and talk with your clients about who you have realized your ideal client is. And discuss those ideal clients in terms of needs they might express that you are particularly good at fulfilling. Teach your clients those trigger phrases so that when they hear them again you will pop back into their mind.

The Second Step In Your Communication Plan Is Training Your Staff

Creating a compelling brand image that will attract referrals requires everyone in your firm deliver a consistent description of who you can help and how.

Carrying out the marketing plans in many advisory firms is strictly the domain of the marketing people and principles. And that's a mistake.

Effectively attracting referrals involves consistently reinforcing the description of your target prospects and the solutions or experiences you can deliver to them. Every time someone in your firm talks to the public – whether it be clients, centers of influence, or just people they meet – is an opportunity to solidify that unique value proposition your firm represents. Your staff may interact with your clients more frequently than you do. Every one of those contacts contains the possibility of reinforcing your brand promise.

The first step, of course, is to describe your ideal client in detail in the solution or experience you can provide to them. Once you have that, first people you should teach it to are the people in your organization.

Sometimes, your staff can be even more effective at directly stimulating referrals then you. In an industry think tank I facilitated last year, one planner commented on how successful his paraplanners were at motivating clients to provide referrals. "There are times when I leave the room during a client meeting," he commented "and my paraplanner would say to the client ‘We just love working with clients like you. We wish we had 100 just like you.’" And frequently, the client would follow-up shortly after with a referral.

More generally however, there can be tremendous power in focusing the message across everyone in the firm. I remember working at a fee financial planning firm where the target client and value proposition was not that well defined. If you walk through the office and asked half a dozen people what the unique value and ideal client of the firm were, you'd probably get five different answers. They would be similar, but someone unfamiliar with the firm or the business might not be able to recognize that. The absence of a clear, unifying message meant that the firm would never reach a critical mass where the reputation could begin propagating itself through the community.

A consistent marketing communications strategy is critical for an effective referral marketing plan. And getting everyone on your team singing from the same page is the first priority once you know the message you want to broadcast.