Executive Summary
Over the past several years, there’s been an explosion in the number of marketing channels that advisory firms can use to attract new leads, turn them into prospects, and finally convert them into clients or customers. Yet, despite the ongoing evolution in marketing, our Kitces Research studies have shown that the most common way that financial advisors gain clients is the same way they’ve been doing it for decades… through referrals. As the profession has evolved, however, so too has the approach to actually generating those referrals, as the invasive “I get paid two ways” tactic has been replaced by having far more effective (and far less uncomfortable!) conversations with existing clients about ways in which they would prefer to connect with new people.
Unfortunately, though, many advisors still have a difficult time actually starting up those referral-asking conversations in the first place, which, in turn, raises the questions: What are the blocking points keeping advisors from having conversations with their existing clients about finding more clients like them, and how can we as advisors overcome those blocking points?
In our 50th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the underlying reason why advisors have such a hard time asking their clients for referrals, how to push forward by instead asking advice on how to grow their practices, and ways to gain the sort of confidence that ultimately eliminate those blocking points altogether.
As a starting point, it’s important to recognize that anything having to do with marketing and business development requires an advisor to put themselves “out there”, which means that there’s a risk of rejection. And since human beings don’t like rejection, it’s that fear of rejection that causes us to find all sorts of reasons to not do what it is that we’re supposed to do. Overcoming that fear initially often requires a burst of courage to take a leap and take action, but the good news is that those leaps not only get easier with repetition, they eventually become something to look forward to as the advisor starts to see tangible results from their efforts and feels “rewarded” for taking the leap.
From there, the next important step is for advisors to gain the confidence that the services they offer really do bring value – so much value to their clients, that they should want to be passionately telling (nearly) everyone they meet about the great work they do! There’s a plethora of pathways towards gaining that passion and confidence, but two of the most important for advisors are by making sure they are in a situation where they are proud of what they do and the services they can offer, and by obtaining the education necessary to have the self-confidence of knowing that they are good at what they do and that they help people.
The key point is that the challenge around generating referrals from existing clients is less about the method itself, and more about overcoming the fear of rejection, and addressing our own self-confidence gaps that may exist. Because at the end of the day, it can be helpful to reflect on the fact that most of the good things that happen in life involve some initial element of risk. Ultimately, soliciting a client’s help in meeting more prospective clients that are like them isn’t about generating referrals or having conversations about referrals, but is simply a way for advisors to try get more people great financial advice that they’re confident they can provide!
Authors:
***Editor's Note: Can't get enough of Kitces & Carl? Neither can we, which is why we've released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and Stitcher.
Show Notes
- Kitces & Carl Ep 49: Getting More Referrals Beyond Just Trying To Be More Remarkable
- Seth Godin: Writing Every Day
- How to Build a New Habit: This is Your Strategy Guide by James Clear
- The Game of Numbers: Professional Prospecting for Financial Advisors by Nick Murray
- 100 Days of Rejection Therapy by Jia Jiang
- Mark Twain: “I've had a lot of worries in my life, most of which never happened.”
Kitces & Carl Podcast Transcript
Michael: Good morning, Carl.
Carl: Good afternoon, Michael.
Michael: We have this whole time zone shift thing because I'm...
Carl: Yeah. I've noticed...
Michael: You're in the UK, so morning here, afternoon there.
Carl: I even noticed how I had to look outside to figure out what it is. Yeah, it's afternoon.
Michael: To actually see if the sun was past high noon?
Carl: Exactly, it's afternoon.
Michael: Maybe at some point, we'll get you a sundial that you can just have on the desk next to you, so you know whether it's afternoon without needing to check outside.
Carl: That's right. A sundial, for sure.
Michael: Carl, we had this great episode of the podcast a couple of weeks ago, where you talked about the process of asking for referrals, beyond just trying to be remarkable and hoping that clients remark on you to others and get referrals. How to actually frame-up that conversation, which was less about asking for referrals and more about just, as I would kind of view it, asking them for marketing and growth advice and letting them suggest whatever they suggest, which may often end up being a referral or an activity you could do that generates referrals or creates connections.
But as you had pointed out in the conversation, and I've certainly seen this as well, a lot of us as advisors seem to be really, really reluctant to have these conversations. Even when you've laid it out with as much of an awesome roadmap as you did, it still seems like it's a really hard conversation for a lot of us. Again, even beyond the skeevy ones, “I get paid in two ways,” or “Can you write three names down on this piece of paper?” You gave, I think, a very comfortable conversation that just revolves around, "Hey, Sally, I'd just like to ask your advice," and having a conversation about how to get more clients like Sally.
Where are the blocking points? I know you have literally had this conversation about how to ask for more referrals with lots of advisors. Not everyone implements it.
Carl: No one does.
Michael: Or as you said, almost no one does. For the people who listened to this a few weeks ago and thought it sounded cool and haven't actually done it at all since they listened to the last episode, what is going on and how do we get over this so that we actually get to the results that we're trying to get to from the awesome conversation you gave us last time? Why is it so hard and what do we have to do?
Overcoming The Fear Of Risk And Allowing Good Things To Happen [03:30]
Carl: I love this conversation. And to be clear, this is the exact same reason we don't do anything involving work in public. I'd make that a big category. It's pretty darn simple to build...the tactics are easy. Here's the little secret. The tactics are easy. It's the doing that's hard. The main reason, when we're talking about business development marketing ideas, almost all of them involve doing something in public. By doing something in public, I simply mean you're going to have a conversation with one person. You may know that you can write an article for your local paper. You know the editor and you can get – that would be, depending on where you live – that could be 20 people or that could be 2 million people are going to read that. Either way, they're public.
What happens as soon as we've got a chance to do something in public? We're being asked to put ourselves at risk, right? I said that in the last conversation. I'm trying to trick you into putting yourself at risk for good things to happen, by making the tactics so easy – sorry, 'easy' is not the right word – so simple that you'll put yourself at risk for good things to happen. Because I know if you put yourself at risk for good things to happen, good things will happen and you can help change the world. I'm pointing at the world because the world needs your help.
With all that aside, it's the same problem. As soon as we think, "I'm going to have this conversation; I'm going to ask somebody something," there's this fear, largely of rejection, right? Mockery. I will be killed and my family will be run out of town. But largely of rejection. And we've been wired that rejection equals death. You know what I mean? If you get kicked out of the tribe, you're going to get eaten. We've just got to unwire that a little bit. We think there's a lion in the bushes. That's what it feels like: there's a lion in the bushes, and we just have to say, "Hey, I'm just typing an email. Everything's fine over here. No one's going to die."
Outside of time – which that's a whole other discussion – and I think time, that's just purely a function of priorities and you've got to decide what your priorities are. Stop telling me, though. Stop telling me you want to build a business and then telling me you don't have time when you have a good idea. Let's just be honest with ourselves. By the way, the other thing I need to mention here is deep empathy for this. I've got a list of things I know I should be doing, and every morning I know – tonight at 8:30, I know my electronics should be turned off. The science is irrefutable. I know it. I won't argue about it. And yet, most nights they don't get turned off. Deep empathy around this, but our job is not to have empathy right now. Our job is to punch you in the nose because the people out there need you, right?
What do we do? I think we just have to understand – I think the first step is to get clear about what we're talking about. We're talking about fear. It's not because you don't know how to do it. This is actually the conversation we have when we teach this in the workshop because we do it 30, 60, 45 days later. People come back and they haven't done it. We have to get really clear. Is there anything about the process you didn't understand? No, because it's pretty simple. Is there any reason you couldn't do it? No, there's no...okay, what got in the way? Let's get down to brass tacks here. I was scared to do it. Or lazy, but I don't inherently believe most of the people listening to this are lazy. I think we just get scared.
One way we deal with fear – and this is where it's really tricky – one way we deal with fear is we make up really elaborate stories. We find places to find. Those places to hide could be like...I know one of your favorite places to hide. Research.
Michael: Oh yeah.
Carl: It's got to be.
Michael: I know how to not do this scary thing. I'm going to research the crap out of it.
Carl: That's exactly right. How many time management books do you need to read before you just manage your time? Exactly. Research. One of my favorite places to hide is design. Oh, we should change the logo a little bit. I don't think that red's exactly the right color. Another podcast I got to listen to a little bit more. That could be research. Just be aware of the things you're doing that are places to hide, and give yourself a little bit of empathy and then punch yourself in the nose and say, "I've got to do this thing." I don't know any other tricks around this. Seth Godin, I love...we had a conversation a month or so ago, and he talked about how he's written every day for roughly 20 years. He has not missed a single day – a blog post every day for 20 years. He was asked, "Every day?" And he was like, "There are a lot of things I do every day. I breathe. I wake up. I brush my teeth. I go on a walk. I eat." He was like, "Look, I write."
We can play that trick too, where we're just like, "I'm going to just make this a process where I do one of these conversations every week on Tuesday, and I schedule it the week before so when I'm done with the one, I make the next call to schedule the next week's." Create a habit, that's what James Clear would say around it, just create a series of small actions that trick yourself into the thing that you want to have. What do you think? You've seen a lot of this. Basic simple tactics. Why don't we do it?
Michael: I think you're absolutely right that the...I think the blocking point is fear. It's: "What if this doesn't go well? What if the conversation's awkward? What if the client doesn't like me? What if the client loses faith in me? What if the client fires me because they're so upset that I asked him this question, they feel so awful?" We build it up and build it up until it basically ends in: "And my business collapses and I'm poor and my family..."
Carl: I have to live under a bridge for...
Michael: Yeah, living under a bridge because I asked this one client for their advice. It builds up and snowballs and cascades.
Carl: For sure.
Method 1: Using A Burst Of Courage To Move Past The Fear And Take Action [10:51]
Michael: What it reminds me of...when I think about fear in general, there are two ways, to me, that you get over fear. The first, I'll call just ‘burst of courage’. I can't help but think back to the high school days, you want to ask someone out on a date, that is about as high stakes of a scary ask for someone as anything that could possibly exist in your teenage years. It makes asking for referrals mild by comparison. If you ever ask someone on a date, how do you do it? At some point, you just take a really deep breath, walk up, ask the question, and pray it goes well. You just have to give yourself a quick burst of courage, and what the heck? We're just diving in and doing this. But if it doesn't go horribly, all willing, and usually it's not – even if it doesn't go well and you don't get a yes – it's not as bad as whatever fear story it is that you built up in your head.
Sometimes just give yourself a burst of courage to say, "I'm just going to take a leap. I'm just going to take a leap. I'm just going to take a leap. I'm just going to take a leap. I'm just going to do it once." Deep breath, do it, hit the send button on that email I've queued up. Oh crap, I hit send. Now I have to respond when Sally says, "Okay, let's do the meeting." Virtually always by the time you actually get through the first one, it's not nearly as horrible as you were expecting, which means the second one takes a little bit of a burst of courage to do it, and by the third one, it's suddenly not such a big deal anymore. Then, at some point, one of them works out well. I feel like the moment one works out well, it's like, "That was sweet. I want more of that." As soon as the good reinforcement comes, the good event in action comes, now my brain, I think, literally physiologically, now my brain starts rewiring itself because it got the reward response to the thing I was doing, and suddenly this becomes the new process and new habit.
But for the first one, when it's so scary, I think of it like any other thing you've got to do, which is scary and takes a little bit of a leap of faith. Sometimes you just have to say to yourself in your head, "I'm just going to do it and take the leap of faith. I'm just going to try to build up a moment of courage and then charge up the hill, say a little prayer and hope I don't die, off we go." And recognizing that we are not actually quite as high stakes as charging the line of soldiers that are shooting at you. This is a person who already pays you a lot of money for your services. They probably kind of like you.
Carl: And remember we...
Michael: This is not actually that high stakes of a situation.
Carl: For sure. Remember, we did all that work to make sure – don't put them on the list if they don't like you. If you haven't listened to the last one, go back and listen. I've worked so hard to make this easy. I agree with all of that. I also think it's interesting, I have a friend, his name is Travis, that started...he has a rejection quota. He's been tracking this for, like, I don't know how many years.
Michael: A rejection quota. This is...
Carl: Got to get rejected.
Michael: ...like Nick Murray's Game of Numbers style? You have to get so many 'nos' in order to get 'yeses', so he fills his 'no' quota?
Carl: He's not in our industry. He's in tech. He's been doing this for five years. He has a spreadsheet; he keeps track every day. He's got to have a certain number of rejections. The funniest thing has happened to him. He finds it hard – he's asking the questions but people are saying yes. He's like, the things that we worry about...there was a great book called that. I can't remember what it was. It was like, The Rejection Project or something, where somebody went around and tried to get rejected. People would say yes. He went into Costco and said, "Can I use the intercom really quickly? Can I make an announcement?" Somebody said, "Yes". But my friend is asking these big things for work. “Hey, could we do this?” Or “Would you like to give us X in funding?” And people will say, "Yes," and he'll be like, "Darn it." Because now he knows he has to go get rejected somewhere else. I'm only pointing out that it's our worst fears. I think it was a Mark Twain quote, it was awesome. It was like, my worst fears...anyway, something along the lines of...I've had a lot of fears and most of them have never happened. Something like that. They don't happen. I've gotten addicted to this kind of...I love that feeling...maybe this will be helpful.
I've actually, I was just looking over at the closet because I've got a little bobblehead that actually helps me think of this. If you can learn to recognize that feeling, I think it's very close to imposter syndrome. This is a very similar fear. I think if you can learn to recognize it, you'll notice that everything cool you've ever done in your life had some version of that. I've embodied it and it's Mr. Burns, Homer Simpson's boss. Whenever that feeling shows up, I think of Mr. Burns in the room, and I think the key – the reason I wanted to mention this is I think the key is noticing it. Because normally, it lives chronically under the surface and you just have this underlying discomfort. What's that saying to you is something's wrong, and it means, "Stop, stop. You're going to die. Stop." But if you can instead learn, "Hey, I felt that way at the birth of every one of my children. I felt that way on my wedding day. I felt that way at the big mountain bike race. I felt that way when I started my own business." Everything cool I've ever done, a little version of that feeling was there. Sometimes big, sometimes small, but it was always there.
If we can learn to...because normally to me, it's a tightness in the chest, a little pit in the stomach, and I'll be operating like this unconsciously, "I'm going to die, I'm going to die". As soon as I recognize it, I go, "Hey, I know that feeling. It turns out I want to do more of that." I'm sort of addicted. I've built my whole business around exposing myself to that feeling as often as possible. I think that's helpful too, to just realize it's not a lion in the bushes. With the rejection quota, you're never going to hit it. Nobody's going to die. And if you can acknowledge that that's that feeling, that's different from the fear of, oh my gosh, a car is about to hit you.
Michael: The other thing this minds me of, most of my sales lessons – I'll come back to those dark, dark days when I was selling for an insurance company, not doing a terribly good job, but at least trying to learn from the people around me who did this clearly much better than I did. There was a guy there named Ron who was...
Carl: Of course there was.
Method 2: Building Confidence To Overcome The Paralysis Of Fear [18:11]
Michael: Yeah, it was Ron. It had to be Ron? No offense to the Rons listening. Ron was the one usually on the top of the board because we actually had the whiteboard where names got put up based on how much you did in production every month, and you wanted to get to the top of the board. Ron was the guy who was usually at the top of the board. Ron, to me, the fascinating thing about Ron, he just asked everybody he met about doing business and this was back in the days of variable universal life insurance.
I swear, Ron never met a person who wasn't a good prospect for variable universal life. Everybody he met. I watched him, once, strike up a conversation in the waiting room with someone's secretary. While he was waiting to meet with the person, he started trying to sell the secretary on variable universal life insurance. “How are you saving for your retirement?” Just chit-chatting in the lobby with someone. On the one hand, Ron, to me, was the quintessential problem of the sales industry. When your only tool's a hammer, every problem looks like a nail. He had one solution and only one solution for absolutely everything. But the interesting fact was, Ron wasn't doing it to be ‘salesy’. Ron did it because he believed it. Deep down, he believed it. He believed the product we put out at the time was the best thing that was out there for anyone, and he had complete confidence that anybody he was working with and talking to, he was helping.
If you truly believe deep down that the thing that you are putting out into the marketplace only ever helps people, why would you not basically tell everybody you ever get to meet about this awesome thing that you do? That, to me, was Ron's attitude, Ron's way of life and being. Granted, it was a pretty well-made variable universal life policy. Ron more than slightly overstated how many different situations it was good for, which is a whole other conversation. But the essence of it, I think, was very powerful. Ron was the number one salesperson in that office because he had more confidence than anybody else that what he was doing was actually helping people. It wasn't false confidence. He truly believed it.
I do think there's an interesting angle around that for any of us, that to me, there are two ways that you can get over these fear moments. One is to strike up the moment of courage, that little burst that we try to summon up within ourselves to take a leap when something scary is happening there. And the second is building the confidence that it's just not scary in the first place. Then the whole conversation mindset changes where it's, "I'm so confident what I do and the value that I bring to the table, I pretty much feel compelled to tell everybody that I meet about what I do. Because I'm not trying to be salesy. I just actually want to help all the people that I see and meet because I really believe at the end of the day it's that valuable." I think there's an interesting question of what does it take for you – collective you, listener you, whoever ‘you’ are – what does it take for you to get Ron's level of confidence? I'll say for me, that was part of my journey. The first thing I realized, if I was going to get Ron's level of confidence was I had to actually stop selling variable universal life, because I didn't actually believe in it at that level, and I wasn't actually that proud of the company that I was at. I realized pretty quickly, no wonder I'm ashamed to tell everybody I'm a financial advisor. I'm actually not proud to be a financial advisor. I wasn't then.
I had to find another company that I could work with, where I would actually be proud and confident to tell people what I did because I was actually proud and confident of what I did. The second for me was – as people now jokingly refer to as the alphabet soup after my name – if I'm going to get confident in my stuff, the way I get confident about my stuff is I know my stuff. I know it, and I know I know it. And when I know I know it, then I can talk about it very comfortably. The path for me for confidence and how I left my first job because I hated sales and I couldn't do sales, to now spending a huge portion of my time doing business development for a whole bunch of businesses at the same time, was turning that confidence equation upside down, which for me at least, I know it's not for everyone, to each their own path, for me it was getting so much knowledge that I felt confident in my knowledge, that I knew I knew my stuff and I knew what I knew was valuable. Then all of a sudden, I was a lot more confident to tell people about what I do and the service and the value that we provide because I know I'm good at it. I know I help people when I work with them, and so I don't feel bad telling them about what I do because I know I'm good at it and I help people.
The other question, the other thing I would put out there is, I think so often, the fear comes from – at the end of the day, I'm not confident the outcome is going to be good. Therefore, it might be bad, therefore it's probably going to be bad. Therefore, I'm going to get eaten by a lion and killed and I won't have a business anymore. But it all starts with, to me, what it really starts with is the, “I'm not confident this outcome is going to be good”. You can try to do the burst of courage and you can build the process, and you can do an excellent actual process as you laid out, Carl, in the last podcast, of how do you literally have this conversation. But to me, the most basic anchor point is what's missing from your confidence level that you're so negative that this conversation isn't going to go well in the first place? Or what's missing from your confidence level that you aren't proud and excited to go tell people what you do and that you're a financial advisor and that you try to help more people. Because if you're doing that much awesome stuff to help people, why wouldn't you want to tell more people about it?
Where is that confidence gap for you and is that something you can tackle and solve? Is that changing companies and firms you represent? Is that reinvesting in your education? Is that something else that you've got to do in your firm or your offerings or your business to turn that confidence equation upside down? It's not a referral conversation or asking for referrals or reluctance to ask for referrals in the first place. I help people and I'm good at helping people, so I tell other people that I help people. Some of them end up doing business with me.
How To Use A ‘Stoke File’ To Boost Your Confidence [25:21]
Carl: I think that's smart; that’s a good point. I've grown fond of saying recently that if you're convinced that what you do helps people, you have an obligation to sell it. And I think that's true, and I think how you become convinced of that is the point you raised, which we could have a long discussion about it. But my short version of it is, I used to keep – I called it a ‘stoke file’, as in ‘stoked’. I would keep stories in there of the impact that I had made, and I could pull that file out at any time and just read through it. After I got done reading through it – and it was either the impact I made or stories I heard about the impact of other advisors. I've got a whole project going on about this right now actually, hopefully we'll be able to say something about it in a couple months.
But the idea of those stories, the impact, the change that you've made in somebody's life or a colleague's made in one of their client's life, collect those stories and brick by brick, it becomes a big wall that means something to you. But every once in a while, you're not getting the right sleep, you're eating crappy, something's going on, your energy level's low, confidence is low. You just look for places to hide. I found that I suddenly needed to do more research when I'm in the basement energy-wise. That's when the stoke file would come in. I'd pull out the stoke file and read through it. I couldn't help it. I'd read through it and I'd go...and I'd include other things in there. Maybe a story from some sports person about how they broke through...it wouldn't take me more than 10 minutes of reading the stoke file before I was out doing my thing again. That's my version of your alphabet soup.
Michael: I love it. I think the essence of this, as we wrap up – I love the comment that you made at the beginning, at the end of the day, you have to put yourself at risk for good things to happen. Not necessarily crazy, or actually taking the risk of getting eaten by a lion, but you have to...
Carl: It's going to feel that way.
Michael: You have to put yourself at risk for good things to happen. As you pointed out, if you think about almost all the good stuff that's happened in our lives, particularly the turning points, almost every major turning point in our lives had some kind of build up to risk right before it or in that transition. And if you had never taken the risk of that build up – ask that person out on a date who turned out to be my future spouse, decide I was going to quit my job or change companies and find a new one that landed me the new dream job that I never thought I would get until I went and looked for it. If you look at those turning points so often, there was a moment of risk upfront that you had to take that risk in order for the good thing to end up happening. Again, I don't want to diminish the fear and scariness of something like asking referrals, but we're not at life-or-death level stakes. It will be okay, especially if you follow Carl's process and you're starting with people who like you in the first place. You can scale back the risk quite a bit. Then at some point, just take a deep breath and the leap of courage to try it out once or twice and at the end of the day, it'll probably only take one of these actually working out and all of a sudden, you're going to find out your mindset shifts because referrals are coming in and that feels really good.
Carl: Totally. Then you add that to the stoke file and you build and you build and you build and you build until it just becomes a habit like Ron. Then you're like Ron.
Michael: And then you're like Ron. But selling good things.
Carl: That's beside the point.
Michael: Sell them something that's actually valuable to all people.
Carl: That was just a metaphor. Ron is just a metaphor.
Michael: No, Ron was actually a real person.
Carl: I know he was. Perfect. Super good, Michael. That was fun.
Michael: Thank you, Carl. Thank you.
Carl: Yeah. See you later.
Can you also expand on your next conversations beyond asking for referrals post sale and post becoming a client. I believe there is tremendous value in pre-client( prospecting) and implementation ( sales) processes that can enhance referral process. There is nothing wrong in earning referrals during prospecting and also the type of client you sign on especially the first 50 clients makes a difference on how you can implement these post sale referral strategies. IN reality, our business is too simple, just get 20 clients who will introduce you to one person every 4 months.