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I think most sales professionals and sales managers would agree with that statement in almost all industries. If that is the case, why don’t they trust them? While this focuses primarily on new advisors, there is no question that it is just as important, if not more, for advisors taking home more than 500k.
I work primarily with the #financialservices industry and without exception referrals are the best way to acquire high value clients. Every single producer and manager states that they love referrals and yet, without question, every single one of them does NOT trust referrals.
Advisors and Managers all want to get the majority of their business from referrals as soon as possible because they both know that is a sustainable and, most importantly, enjoyably profitable business model that will produce a successful career.
So why don’t they trust referrals?
Here is why: They don’t know how to predict them.
There are two basic places that are vitally important when attempting to predict referrals for financial advisors and the firms that recruit and hire them.
- New Advisors to the industry
- Experienced Advisors looking to scale their business
In the interests of time and your attention...we are just going to focus on new advisors for this week's article.
New Advisor
Every manager or recruiter in the industry that I get the chance to sit down with and discuss advisor recruitment and retention wants their new advisors to be successful. They and their firms have invested significant time and money into teams of support personnel, systems of training and development...and still we have horrible retention rates of new advisors at 1 and 3 years. (In most cases I am hearing sub 20%).
I am going to submit that this is because we are recruiting and training advisors to survive for 1 year when, instead, we should be recruiting and training advisors that will successfully navigate towards a referral based practice in year 3.
When advisors begin their career with traditional training systems focused on, to be honest, cold calling (or, to use today’s watered down term...outbound prospecting)...they are not learning the skills and habits necessary to optimally become referrable. I am not saying that cold calling is bad and/or doesn’t provide good training. However, if the goal is to be ‘by referral’ primarily at year 3...maybe we should at least start with a recruiting system that has that in mind?
Enough background...why don’t they trust referrals? Because they don’t understand how to manage and forecast their success.
At least with ‘traditional’ prospecting techniques and the new social media outbound tactics we are getting solid metrics...or, are we?!? The results don’t bear out from what I am seeing...the only valuable part is that at least you can see what is happening.
Referrals, just like cold calling, rely on the correct amounts and types of activity...and believe it or not, a lot of the activity is similar and very easy to track and refine. We still need to make a certain number of calls, we still need to be tracking meetings and appointments, we need to be using social media correctly and we (shocker) are going to need to do some creative and inspired ‘outbound’ prospecting to enhance our referral based sales efforts. At the end of the day, if I can’t get referred by somebody else to a high value client I am going to refer myself.
I think the real problem with trusting referrals for new advisors is the false assumption that since the new advisor doesn’t have a client base or professional network that they won’t be successful with referrals. I respectfully submit that is also why so many advisors are unsuccessful with traditional sales efforts.
The two main benefits of cold calling, in my experience, are the volume of conversations (essential for any type of new sales professional) and they absolute requirement to be able to have the right types of conversations (target market, value proposition...being able to talk about what the prospect actually wants in a way that compels them to meet with you). Why wouldn’t a high volume of conversations with targeted prospects be part of a referral based sales system? It is.
Unfortunately, most referral training for financial advisors (in my experience) has a major area of weakness: research. If your research sucks...your prospecting will suck worse.
The ability to identify what an ideal prospect is (99% of all financial advisors fail this test) and then to be able to find out where and how to get an appointment is the key to the success of any sales professional, let alone a financial advisor.
Let me make this easy: If you don’t have a list of specific names and contact information for enough prospective ideal clients to cover your next 12 months of sales...you have failed. Any real sales trainer would have helped you compile that list and then would be working with you to get meetings with them. It is not different in referrals.
The secret to referrals, and cold calling, is to have the right list of prospects. Once you do that foundational work (research)...then you can come up with a plan that can be analyzed and improved (both before and during your sales efforts).
I am going to be a little bit confrontational here...most people in the financial services industry have no real idea how effective their sales process is because they are only measuring a very small part of the process. When I ask questions that would be very normal for outside sales professionals at the same level of success in B2B (business to business) sales...I get few answers. It isn’t all about how many calls you make.
Heck, most financial advisors don’t even know how many referrals they get per year...they have no idea what the real, over time, value of an ideal client is for them and, thus, have no way to accurately measure the true value of a prospect appointment. If you don’t set up your formula correctly...you will not get the result you want.
This is why you and your manager don’t trust referrals. You aren’t really doing professional sales. You need to practice and train the entire sales process if you want to get the most benefit from your efforts and investments. You rebalance portfolios and evaluate risk tolerance with your clients don’t you?!? Why don’t we apply that same amount of thought and planning to your sales process?
Referrals are just another way (a better way) to predict the success of a sales effort for individuals and organizations. They require exactly what any other type of sales does to be successful: research and a full sales process.