The benefits of dating referral partners

The benefits of dating referral partners

The benefits of working your network and forming successful referral relationships are clear.

A credible, influential and informed referral source can provide a steady stream of warm, qualified leads and catapult a fledgling business to great heights. It can be the backbone of an established business, contributing to sustainable growth.

But despite the obvious benefits, financial advisers have traditionally struggled to identify ideal referral partners, enter formal agreements and maintain fruitful ongoing relationships.

When it comes to forging referral relationships with centres of influence (COI), their haphazard approach and lack of preparation has hindered their ability to achieve tangible results.

One of the most common mistakes advisers make in this area is to rush the process. After initially meeting a potential referral source, they expect referrals to start streaming in but it takes time to gain the trust of a COI and spur them into action.

Advisers need to approach the business of referrals like they would dating and marriage. There are generally four key stages in a relationship: meet, date, propose and married life. No rational person proposes on their first date and no rational person says ‘yes’ after one date. There is too much risk. Similarly for COIs, it is high risk to refer clients to a third party they know little about. Advisers need to win the trust of COIs by courting them.

The dating phase is not about getting someone to like you. By and large, rapport can be established in the initial meeting. Dating is all about building trust which may take several meetings spread out over a number of months. That time is important for addressing fears and concerns, and overcoming objections and obstacles. After a successful dating campaign, you will have earned the right to progress the relationship and ultimately propose.

The proposal phase may take a couple of rounds of detailed discussion and negotiation. Forming referral relationships is a serious exercise yet too many advisers approach it casually. They don’t come prepared with formal documentation. They can’t articulate the client experience and the high level of service each client will receive.

Advisers may give a COI a corporate brochure or a sample SOA but that is not the collateral a COI is most interested in. They need a proposal that motivates them into action. Although trust has been established by this stage, trust doesn’t guarantee leads. A proposal must capture the attention of a COI by detailing the commercial benefit to them so they are incentivised to understand an advisers’ ideal client and pass on qualified leads.

Too often referral agreements are heavily stacked in favour of the adviser and not the COI. 
Tangible motivation factors for COIs may include referral fees, cross referrals back to them and the ability to collaborate on projects and share costs such as marketing, seminars and technology. 

At the end of the day, they are business owners and entrepreneurs. They are focused on commercial outcomes.

Another mistake advisers commonly make is they don’t ‘date’ enough people and develop a type. Unlike love and marriage, forming new referral relationships is a numbers game. Exploring opportunities with multiple COIs increases the probability of finding the perfect match or several perfect matches. Furthermore, advisers need to think outside the box and approach different types of businesses. There are literally dozens, if not hundreds, of potential COI in any one local area yet advisers typically stick to the predictable options; accountants, solicitors and mortgage brokers. Chances are other advisers in their area have already approached the same companies.     
Referrals are a complex game and referral relationships need to be fostered. It can be hard work but it can also be thoroughly rewarding. Client referrals are fantastic but they don’t have the ability to transform a business the way a COI strategy can.

David King is principal of Vue Consulting