Is it really possible to build a financial planning business completely on word of mouth?

August 1, 2005- It always surprises me to find that there are excellent coaches, tucked away in industry niches, who are barely known to whole segments of the planning industry. Bill Cates, "The Referral Coach," is one such coach I met with my coauthor, "D" Shannon, while researching my latest book.

The question, "How can an adviser rely solely on referrals as a marketing program?" seems to demand a second question, "How can a coach hang his or her hat on only one, narrowly-focused technique?" But the fact that Laurel, Md.-based Cates is still plying his trade after many years is evidence of his value.
"I went through Bill's four-step process with a new client," says James Wendlandt, a CLU and ChFC with Northwestern Mutual Financial Network in Austin, Texas. "Before I knew it, the client was on his computer printing out a list of 10 business owners, saying that he would e-mail these guys to say I'd be calling. Then he said to me, 'By the way, if you do well with this list, I have plenty more.' " With that kind of client response, Wendlandt doesn't really need to do seminars or direct-mail campaigns.

There are two keys to Cates' advice. The first is being referable. The second is asking for referrals the right way.

You're referable, Cates says, if you're already getting some referrals without asking for them. For that to happen, you must be a real planner giving valuable advice to your clients, not just selling them the stock or mutual fund du jour.

Asking for referrals correctly is the element Cates adds to the process. "Begin by planting seeds," he advises. "That is, make sure your clients know you're open for more business." Cates' adviser clients frequently tell him that when they let existing clients know this, they often hear, "I didn't realize you were taking on new clients."

Another reason clients sometimes don't refer, Cates says, is that they selfishly think that you won't have time to serve them if they send more clients your way. "The opposite is actually true," he says. "By getting referrals from clients, advisers don't have to lead seminars that take up their time."

Harry Schiavone, with ING Financial Advisors in Fairfax, Va., says his closing ratio was about 50% before meeting Cates. "I was doing a lot of outbound marketing. Now that ratio is closer to 75%. Virtually all of my new clients call my office saying, 'So-and-so recommended that I call you. Do you have time to meet with me?' "

Clients must understand that you can handle more business. Sounds obvious, but Cates has discovered these lessons are anything but.

FEAR FACTOR

"Advisers don't ask for referrals because they're afraid of hurting the relationship, of hearing 'no,' of coming across as too aggressive or of looking unsuccessful or needy," Cates says. "Their hesitancy takes a lot of forms but boils down to fear."

So he tells advisers that the solution to the problem is in that fear. "If what's stopping the adviser from seeking referrals is the fear of looking unsuccessful, then the adviser must stress with clients the importance of bringing his or her good work to their friends," Cates says.

This is an essential point for making the referral process work: Take the focus off the adviser and put it on the prospect. If advisers are referable, if they are doing good work, then their mission should be to spread that to other people. That's what gives them the confidence to ask and gives clients the reassurance to refer.

"Sometimes asking for referrals is as simple as saying to a client on his or her way out of your office, 'Don't keep me a secret.' " Cates says. "Following a successful meeting, clients are thinking about your value. Yet most advisers do nothing with that opportunity except to say, Happy to help.'
"Instead, try saying, 'Glad you find this valuable. Please share this experience because I'm never too busy to bring this important work to others you care about.' "

THE "VIPS" PROCESS

What is the four-step process Wendlandt referred to earlier? It goes by the acronym VIPS, which stands for Value discussion, Importance, Permission to explore and Suggest names and categories. The "P" actually comes first, though. "You need to get permission from your client to have the discussion about 'V'--the value of your work," Cates explains. "In a collaborative manner, with your client, you want to identify some people who can benefit from the work you do."

The "I" stands for Importance. "Treat this process with importance by making sure there's enough time to have the referral conversation and by having confidence in the way you communicate your request," Cates says. "You can't be apologetic." Finally, "S" is for Suggest names and categories such as friends, family or business associates who would benefit from a referral to the adviser.

"When you ask for referrals using the four-step process, some people will give referrals right on the spot," Cates says. "Some will do so later--on their own terms. Some will never give you referrals, but you're not going to hurt the relationship."
Aquiles Larrea, formerly with Merrill Lynch and Morgan Stanley and now owner of International Wealth Management Partners in New York, is also a Cates devotee.

"One hundred percent of my new clients now come from referrals," Larrea says. "Not only do referrals produce clients more attuned to my market niche [those in job or retirement transitions], but I doubled my revenues in the first year of working with Cates. Last year I was up another 25%, and this year I'll be up over 25% again. If you immerse yourself in Bill's techniques, there is no doubt that you are going to get referrals."