This will be the first of a series of posts on sessions from this year’s FPA Experience, held last week in San Antonio, TX.
Julie Littlechild, author of several studies on client attitudes and referral behaviors including Anatomy of the Referral, presented “Cracking The Referral Code” including new data soon to be released in this year’s update of Anatomy. In this program Littlechild explains that to seriously drive referrals we need to get away from the “cult of satisfaction” and to look more deeply at what drives client loyalty.
In her studies, she sorts clients into one of four categories from Disgruntled to Engaged. It is important to understand the drivers that lead clients into each of the groups because, while overall satisfaction ratings are not widely distributed, all referrals come from the Engaged group. There is a lot of behavior that client satisfaction simply cannot explain. Advisors fail to attract referrals because they have several mistaken assumptions about client satisfaction:
- · Satisfaction is loyalty
- · If I focus on satisfaction referrals will follow
- · Clients refer because they want to help my business grow
Focusing on satisfaction is a dead end because it is too broad. Engaged clients, hence referral sources, require a closer connection. They require a partnership with the advisor. And partnership arises from several aspects of the relationship including:
- · Shared values
- · Going beyond the portfolio
- · Involving family
- · Giving clients a voice
The feeling of partnership can be enhanced by focusing on clients that have shared values. While this is obvious it is often overlooked. It is a big component of “fit.” While Littlechild found that 89% of advisors say fit is important, only 23% have actually incorporated it into their client acceptance processes.
Giving the client a voice is very important as well. Littlechild’s most current data show that 64% of clients believe that an opportunity to provide feedback is critical.
She finds that we can capture much more of the “low hanging fruit” of referrals by paying closer attention to those activities that build partnership with clients. The payoff, of course, can be substantial. The study revealed that 67% of clients would make a referral if they heard a friend describe a challenge they believe their advisor could address, even if that friend did not explicitly ask to be referred.
Look more deeply at your relationship with clients. Go beyond satisfaction and you can start generating the referrals you hope for.
I will discuss fit in my next post, reporting on Tom Reimer’s presentation on that topic.
Brokerage firms are not structured to acknowledge or support advice (fiduciary responsibility) as such,brokers just sell advice as a product with minimal actual advisory capability which is a violation of the internal compliance protocol of their supporting broker/dealer. There fore objective assessments of client satisfaction using obvious meterics is not possible, especially if technoical competency is a measurable consideration which would require a third party assessment of the depth and breadth of counsel provided. So, unless one is exceptional, and there are many advisors that are, client satisfaction is a not a good referal reference point unless executed objectively evaluated by a third party set up to do such an evaluation like Dalbar. The SEC has approved Dalbar to create such a rating with out it violating its advertising rules, which would be the gold standard for client referals.
SCW
Stephen,
Your comments are well taken in the context of an objective assessment of an advisors competency relative to client satisfaction. Julie is hypothesizing, and I agree, that how satisfied clients are does not, all by itself, lead them to refer. It is an unfortunate truth that many advisors who are not on top of their game technically have very satisfied clients and vice versa. It would be great if how well you performed the technical aspects of providing financial services translated into client engagement, but it doesn't. That's not just in our field – when I was a kid, I had a dentist we loved. Turns out he was lousy at his craft, and a lot of his work had to be redone when I became an adult.
Even getting a third party assessment like from Dalbar would not do it. That is still attacking a right-brained issue (how people feel about you and what you have to offer) with a left-brained strategy (scores and rankings). That's what makes it hard for us advisors. The best of us have a tendency to have great left brained skills. And the biggest threat to the integrity of our industry is the salespeople who excel at right brained customer service skills, because that's what attracts clients.
The best thing we can do, for our clients and for our profession, is to acquire or hire some expertise at these right brained activities and get clients referring us more often!