Principle 28: Don’t Ask for Referrals

Earn them Instead

Virtually every practice growth guru I have ever come across utterly demands that you ask your clients for referrals. They say you should ask, ask often, offer incentives, and throw parties. But, I say you should view asking for referrals like you view marketing: its goal is to eliminate its need. You should only ask for referrals if you are not already getting them. If you are getting them, then better to improve their frequency and quality by earning them instead of asking for them. Not asking for referrals is itself a strategy. Asking for referrals is distasteful for advisor and client alike. Not asking gives you some mystique. Clients will think, “Maybe he already has all the clients he needs? I hope he will accept my referral.”

I am ashamed to say that I have said to clients, “Send me some business.” I have tried the “I get paid in two ways, commissions and referrals.” I have even tried the, “Who do you know that could benefit from my services?” I even know one trainer who claims he tells his clients that he will not work with people who don’t respect him enough to send him referrals. Makes me want to puke. I prefer the high road. Rather than asking for referrals, I want to earn them, and earn them I do. About 50 a year, which is about all my advisors and I can handle. I earn referrals regularly, and I teach my advisors to do the same. Here’s how.

Grow Organically

“Healthy sheep reproduce naturally.” – Chuck Smith. What he meant was that healthy Christians will win new Christians to the faith all on their own. Pastor, evangelist, church planter, and author Chuck Smith was the founder of Calvary Chapel, the newest major evangelical Christian association of churches (domination) in the United States. The Calvary Chapel Movement, as it was once known, was born during the mid 1960s in southern California when Smith began evangelizing the youth of his generation and teaching them the Bible, verse by verse, chapter by chapter, book by book.

He believed that once a person was successfully evangelized (that is, once they had accepted the good news of the Christian faith), the best way to reach others was to a). disciple his new converts in the basic doctrines of the faith by teaching them the Bible; b). love them like his own children by spending lots of time with them; and c). meet their spiritual needs with effective counsel and guidance. Once he began to raise and nurture his sheep, they became a large, healthy flock. And, as he so aptly put it, ” Healthy sheep reproduce naturally.”

Build Your Congregation

Chuck Smith founded what many consider the healthiest and most effective American church growth movement in a century. As financial advisors, we are in a similar dynamic. Our parishioners are our clients. Our pulpits are our seminar lecterns and  conference room dry boards. Our doctrines are the principles of financial planning.  Our ministry is loving and caring for the financial needs of our clients. Our counsel and guidance is the advice we give. In a sense, every investment planning practice is a financial church, so to speak, with a congregation of hundreds of families to watch over and care for. This is the key to earning referrals.

Treat your book of clients like a pastor treats his congregation. He tends his flock with love and care, patience and gentleness, generosity and kindness. He empowers them by stretching them and teaching them the deep doctrines of the faith, so that they can be resourceful and effective decision makers in their own right. He creates a vibrant atmosphere of continual personal growth that compels his members to want to share their experience with those they love and care about. He makes his church a safe haven for the lost and broken who want to come in from the cold.

Principle 27: The Book Produces (Part III)

Love the Book

Stopping all forms of active marketing and subdividing my book of clients with other home grown advisors in my practice was the best move I made since starting the firm 10 years ago.  Now that each year every client in our firm is getting 2-3 financial planning meetings and at least an annual review (if not quarterly), 2 risk review visits, 2 tax planning and tax return preparation consultations, and at least 1 conference with our estate attorney, they are feeling the love. They are no longer in the dark and alone. They are reminded of how much they value their relationship with our firm. From their new understanding of the reasonable investment returns they earn on their portfolios, and from the comprehensive, personal, and hands-on guidance they now receive from us, they can’t help sending us new clients. It is important to produce good returns through well diversified portfolios, but if clients don’t see the gains, they won’t be happy. It is important to design a system of regular and meaningful client contact, but if you don’t execute well, they will leave.

Money on the Table

Everyone knows that the number one reason clients change advisors is lack of communication. Don’t fall into the trap of believing that once a client brings their portfolio to you, and you reallocate it, there isn’t any more business to be done with that client. During the period of their neglect, we found that these “ignored” clients had amassed significant new wealth through inheritances, early retirement packages, divorces, life insurance proceeds, accumulated savings, business buyouts, and numerous other sources. Moreover, many of these clients and/or their spouses had retired, opening up their pensions, and their 401k, 403b, and 457 plans, as well as their stock options and stock purchase plans, to rollover and reinvestment. In some cases, other advisors had moved in on us and taken business. We had no one to blame but ourselves.

If you are a low-hanging fruit kind of advisor, shame on you. Stop selling and start loving. Why not take better care of your clients and get their entire portfolios? Or, maybe you think you have all the money already, so you ignore them. But, time and again we are told by industry experts that investors typically use more than one advisor and often withhold their full financial picture from their advisors. Stop ignoring and start loving. The best way to position yourself to manage the client’s complete financial life is to love them with time and energy. Remember those Easter egg hunts each spring when the grown ups would place all those beautifully-colored eggs out in plain view? That’s what new assets look like to an advisor who finally understands how important it is to love the book. Remember how nice it felt on the playground to be introduced to a new friend by an old one, or to be invited into a private group or circle of friends at college by one of the group’s members, or to be recommended for a promotion or a great job? That’s what a new referral looks like to an advisor who remembers how important it is to love the book. Get off the marketing treadmill, bring up a junior advisor, divide your book, and reap the rewards. Love the book because the book produces.

Principle 27: The Book Produces (Part II)

Dividing the Book

Passing two-thirds of my clients over to other advisors in my office was a good thing for everyone involved, but it only partially helped. Dustin and Larry started making more money, but each of them already had their own areas of responsibility in the firm. Dustin ran operations, and Larry ran tax and accounting. Sure, I relieved myself of the guilt of neglecting a significant number of my clients, and certainly they started getting some needed attention. Yes, I was able to lavish a lot more love on the clients I retained. But, Dustin and Larry quickly became overwhelmed. We needed another plan to  ensure we made good on the original promise we made to our clients when they hired us: to guide and manage their financial affairs for the rest of their lives. Dividing the book was only the first step. The next step was to expand our advisory staff. Our clients deserved not only a good advisor-client relationship and experience, they deserved great ones. Without more advisors, our clients were going to languish.

Enter the Paraplanner

I decided that I needed to bring on an advisor trainee who would act as a personal financial planning assistant and gain experience at my right hand. I had been the route of hiring advisors with licenses and experience, but this never seemed to work out. Either they were unsuccessful in their former positions and brought their unsuccess to my practice, or else they left their former positions unwillingly and brought those causes to my firm. In every single case (4 of them in a row), the hired guns ended up as liabilities and were let go. The only ones that have succeeded and remained have been the ones who were home grown. We worked out a process of paying recruits a modest base salary, sponsoring and paying for their licenses, giving them a year to learn the basic ins and outs of the business, and introducing them into our existing client relationships. We called the position Paraplanner.

The paraplanner works as my personal assistant, running research reports for client accounts, keeping prospectuses and sales kits in stock, tracking investment product performance, training clients to use our online account access system, executing securities trades, maintaining blotters, and performing due diligence on new investment offerings.  Once they get their sea legs, they are given clients from my personal book to manage on their own. Eventually, each paraplanner becomes a home grown, full-fledged financial advisor and goes full-time on straight-commission, giving up the salary and responsibilities when they feel they are personally ready. It takes about 18-24 months to complete the training, licensing, and conversion. Each paraplanner hires and trains his or her own replacement before being relieved of the position’s daily duties. None of them have ever looked back. Since I bring on about 40-50 new clients a year through referrals, a new advisor book of business is created within the firm about every two years.  The recruiting, training, and licensing process takes about as long to complete as it does to amass enough new clients to support the new advisor making the transition. It is a very effective system.

Stay tuned for more…

Principle 27: The Book Produces (Part I)

Don’t be a Hoarder

You probably have too many clients. I recently attended an industry conference at the Broadmoor Hotel in Colorado Springs. At dinner one evening, my wife and I sat at a table with a couple of other financial advisors and their wives. After a delightful political discussion (we were all cut from the same conservative cloth), the conversation finally came around to business. One advisor asked me how I marketed my practice. “I don’t,” I said. “Just referrals, that’s it.” Then, I asked him a question, “How many client families do you have?” He said “800.” I asked, “How many advisors help you manage your book?” He said, “None.” I said, “You have too many clients. You can’t possibly love that many families. You are mistreating a lot of people.” He agreed and sighed, “But, I just can’t stop marketing.”

The Mega Church Syndrome

I am always fascinated by, and not a little irritated with, large churches. (Some of this comes from my own injured pride, I’m sure, since I planted and bi-vocationally pastored  for 12 years a very small church, which never grew to more than about 50 families.) Studies indicate that the average full-time pastor can effectively minister to a maximum of about 150 families. If he visits with each family four times a year for just an hour, that works out to 600 hours, not counting any drive times. Add in sermon preparation for 2-3 weekly messages (another 500 hours), 2-3 weekly worship services (another 300 hours), evangelizing new prospects, weddings, funerals, hospital visits, business and committee meetings, speaking engagements, and community events, and the pastor is spent.

With some churches reaching weekly attendance levels of over 25,000, someone is getting lost in the shuffle. No one can pastor 25,000 people. Mega churches argue that they have additional pastoral staff members, deacons, lay church leaders, and volunteer servants who help with the work load. But, I say again, no one can pastor 25,000 people. In churches that large, it’s likely that the pastor isn’t pastoring anyone, or if he is, it is only a small select group of key leaders and perhaps his own family. But, there is little doubt that many, and maybe most, people are getting a superficial experience without any real spiritual growth. Mega churches are known for hemorrhaging church members.  Financial advisors do this all the time in their investment practices. They keep promoting, marketing, running seminars, advertising, and so on, until they burn out, retire, or die. Ultimately, a lot of their clients suffer from little or no contact, a poor advisor relationship, and a neglected investment portfolio. Sure, the money keeps rolling in as new clients are brought on board, but the older clients who are getting neglected eventually look for other homes for their portfolios where they will get the attention and nurture that they need.


If you have more than 150 client families, you have too many. Get off the marketing treadmill. I didn’t recognize my problem until I was informed by my staff that clients were complaining about waiting weeks to get in to see me. Clients would complain to my face, “You’re a hard man to see.” I was embarrassed and ashamed. It occurred to me that I had overmarketed. In my zeal and determination to build a successful, thriving practice, I overlooked the fact that I had reached my goal two years earlier than I realized. In other words, I had overmarketed by two years. I sat down with the staff and divided my client book up into 3 categories: 1). the ones I would keep; 2). the ones I would pass along, but who needed a high level of sophistication and service; and 3). the ones I would pass along, but who were smaller, low maintenance clients. My right hand man and operations manager, Dustin Martin, got group two, and my tax manager, Larry Metivier, got group three.

Stay Tuned for More…

Principle 26: Be Exclusive

Divorce Attorneys

Your little sister just called while you were driving in your car. For years she has been beaten, cheated on, and has now at last been abandoned by her loser, jobless, alcoholic husband. She has asked you to recommend an attorney. You knew this day would come. She and her husband are constantly moving from rental to rental, they are always blowing up at family gatherings, and they are raising a couple of brats (your nieces). Just then you pass a billboard that reads: Call Lawyers Dewey, Cheatham, and Howe – Bankruptcy, Speeding Tickets, Criminal Defense, Wills and Trusts, Personal Injury, Tax Planning, and Divorce. You think to yourself, well, I suppose they could handle things.  Then, you pass another billboard that reads: Colleen N. Army, Divorce Attorney – A Pit Bull in High Heels and Lipstick. Who are you going to check out? The lesson here is that a jack-of-all-trades is a master-of-none. When people are hiring a financial advisor, they want a trained specialist, not someone who can’t focus.

Branding your Practice

The name of our practice is Senior Partners, LLC. Our tagline is: Planning for Mature Investors. Prospective clients immediately know who we are and what we do.  Don’t name your practice something tired and nebulous like The Amalgamated Diversified Financial Planning Company or the one-size-fits-all Investments Are Us. Instead, use your own name in the name of the business, or allude to your target client, like my good friend Megan Phelps, whose practice is named Empress Investment Group. Yep, you guessed it. She works with women and wants them to feel like royalty.

Our value proposition is: Innovative financial planning for mature investors who value alternative investments, comprehensive wealth management, and a personal and intimate relationship with their advisor. We arrange our clients’ portfolios and affairs so they can generate robust income, ignore the stock market, live life again, and leave an enduring legacy. Don’t use terms like integrity, honesty, and loyalty to describe your attributes (yawn). Everybody expects and demands those kinds of things. Instead, lay out for your prospective clients exactly what you plan to do if they call you. Set an expectation in your branding and then proceed to deliver it with verve and aplomb. You need to be known for something. Now, I know that some of you are thinking, “He’s crazy. That will never work. He is leaving all kinds of business on the table because he is alienating everyone outside his client profile.” People who say something cannot be done should not interrupt those who are doing it.

Kids and their Toys

We’ve all seen kids playing together. Things start to fall apart when one kid picks up a toy and another kid realizes he has just lost the option of playing with that toy. Often, a fight ensues. The second kid snatches the toy from the first kid, and the first kid fights to get it back. We all want what we can’t have; it’s human nature. Being exclusive means setting some limits and narrowing your focus. But, it doesn’t mean you can’t take on other clients and work. Here’s a common conversation in my conference room.

Client: Noel, we love what you do for us. You have changed our lives.

Me: Thank you. You are very kind. I love working with you. I am pleased to be of some value.

Client: Say, we were wondering. Do you only work with retirees with a lot of money?

Me: Tell me what you’re getting at.

Client: Well, my brother could sure use your help.  But, he isn’t retired yet. Would you be willing to meet with him?

Me: Certainly.

Client: But, he doesn’t have as much money as we do.

Me: If he is important to you, then he is important to me. I always accept every referral from my clients.

Client: Will you call him? We can give you his contact information.

Me: When he is ready, ask him to give me a call. We will take good care of him.

Being exclusive raises your stock, identifies you as an expert or specialist, and makes you desirable. Being exclusive helps you build a unique brand. Being exclusive puts you in the position of picking and choosing which prospects you’d like to work with and what sort of work you’d like to do. Don’t be a general practitioner. Carve out a niche for yourself, and go for it!