“My business is all referrals.”
I hear this claim from financial advisers a lot, and I’m skeptical. My team managed over a billion dollars. We received our share of endorsements. But waiting for them was like watching grass grow.
Think about it. There’s plenty of downside for a client who sings your praises to friends and family. Because the next bear market, he or she is likely to get the proverbial stink-eye.
We all know what happens. One of the in-laws begged for financial help when markets were good. Now portfolios are down. Your new client is furious. And the family’s nickname for you is “Sasquatch.”
Bari Goodman
No wonder referrals tend to be sporadic. Which is too bad. Warm introductions are far easier to convert than cold calls, where you can spend years tap-dancing through a prospect’s objections.
Asking for referrals is awkward. How do you pledge discretion one moment and request a public testimonial the next?
So is anyone telling the truth when they say, “My business is all referrals?” In search of the secret formula, which I’m dubbing Referral Potion #9, I asked experienced advisers how they get those warm introductions.
Jeff Spears is the co-founder and CEO of Sanctuary Wealth Services, a consortium of RIAs with $2.3 billion under management. He estimates that 90% to 95% of the growth for independent financial advisers comes from referrals by existing clients and centers of influence.
Quarterly meetings, he says, are the right time to ask existing clients for referrals because “other ways seem too ad hoc. You’re having the most substantial conversation you will ever have.”
He was quick to add, “You can’t get referrals unless you’ve done a good job” and delivered good investment results.
I buy that.
As for centers of influence, he says lawyers and accountants are more likely to refer their clients to registered investment advisers than to the big Wall Street brokerages, given 1) the conflicts of interest from, for instance, selling proprietary products and collecting commissions and 2) the greater likelihood of negative headlines. For the record, Mr. Spears is a veteran of both camps during his 27 years in wealth management.
Next I spoke with Michael Serafino, a member of a three-person team at Raymond James in Springfield, Mass. Mr. Serafino has been in the business 34 years and says, “In the last 10 years, 100% of our new business has come from referrals.”
“We even get referrals from people who aren’t clients,” he says.
Wow. I guessed he must be very good at asking for them. “I’m going to disappoint you,” he responds. “We don’t ask for them.”
Mr. Serafino stresses the importance of making the benefits of an advisory relationship clear and memorable. An easy-to-understand business, he says, “sends a sales force into the world.” His group manages money on a discretionary basis, favors technical analysis, and emphasizes service.
Okay, I get that. Do a great job for clients and prospects over an extended period of time, and the referrals follow. Longevity is a huge asset. But what if you’re relatively new with, say, five or 10 years in the business?
I asked Mark Germain and Tina Powell of Beacon Wealth Management how they ask for referrals. Beacon is a fee-based RIA in Hackensack, N.J. that Mr. Germain founded following a career in public accounting and as the CFO of an international software company.
Ms. Powell began by defining what she calls the “wow moment.”
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The New York Times describes my novels as “money porn,” “a red-hot franchise,” and “glittery thrillers about fiscal malfeasance.” Through fiction I explore the dark side of money and the motivations of those who have it, want more, and will steamroll anybody who gets in their way.