Why referral is important?
As a fee-based financial planner, I have to rely significantly on referral. Why referral is important?
Wastage of resources
Most financial advisers spent 80% of their time in lead generation through advertisement, roadshows, cold-calls and so on. The high cost of marketing is associated with product mis-selling. I wrote an article to illustrate why it is a mathematical necessity to mis-sell products when the marketing cost becomes too high by using realistic figures: Free advice is going to cost you your entire HDB flat!
Since there is only 24 hours 7 days a week, more time spent on marketing implies less time for clients. It is to the advantage of clients that I spent most of my time helping them than to do something else.
Why referral does not come naturally in the financial advisory industry?
Most professionals heavily rely on referrals. Doctors, lawyers, engineers and accountants often solely depend on referral and recommendations to obtain new customers. Many of these professionals do not do significant marketing, advertisement, seminar selling and hiring of telemarketers etc. The main reasons why they do not need to do so much marketing are:
- There is a high demand for some of these professionals due to regulations. E.g. accountants must be employed for internal audit. Professional engineers must be employed in M&E activities.
- Some of these professionals solve clients’ problems when their clients are already facing problems. E.g. doctors treat patients’ illnesses and lawyers come into the picture when their clients face legal challenges.
Financial planning is not required by law and the approach to financial planning is prevention of problems rather than solving it. Once a financial problem arises, it is not possible to solve it. For example, retirement planning must be done early. Once a person is unable to retire, financial planners cannot solve it. Hence, the demand for financial planning is not high due to the perceived lack of importance.
Why referral does not come easily ?
Because I live in this part of the world called Asia. Asians seem to have a tendency not to refer due to a variety of reasons. I have no problem getting referrals from expats. Here are some possible reasons why Asians tend not to refer:
- You may be too concern on how others think of you. “Face” issue? There could be 101 reasons why you feel others may not think well of you just because you refer a financial planners to them but all those reasons do not matter because they are just perceptions.
- Fear of intruding into your friend’s privacy. Again, this is just perception because you do not intrude into anyone’s privacy just by referring my services to them. Illogical it may seem but this is THE TOP reason.
- Fear of your own privacy being intruded because you now disclose you use the services of a financial planner. Just as you have no issue sharing why you subscribe to Netfix / Spotify / etc, letting others know that you have taken the responsible step in seeking professional financial advice is nothing to be concern about.
- You think that your friends do not need any professional financial advice. This is also perception. In fact, statistic has shown that Singaporeans are generally underinsured and not prepared for retirement. Statistically speaking, your friends are likely to need financial advice.
- Do not know who to refer. This is the easy part. Just look at who are your facebook friends and who you WhatsApp with recently.
- Do not know what to say. See below.
- Fear of being ‘jeopardized’ by a bad service. See below.
- You assumed that Wilfred Ling has too much business and does not require additional clients. Not only is this untrue, but I have problems getting referrals especially from Asian clients.
How to refer? Here are 4 easy steps
Here are 4 easy steps you can follow which are used by my other clients with great success:
- Think of two top benefits you gained through the interactions you had with me and how these benefits justify the fee you paid.
- Share with your friends of these two top benefits you gained.
- Ask for their consent to have their contacts given to me.
- Make the introduction by emailing your friend and CC me together with their mobile number.
Once I received your email, I will speak with them over the phone or have a preliminary meeting depending on their preference.
Rest assure I will not do anything that will jeopardize your reputation. Moreover, if they do not wish to proceed after the initial discussion, they will still thank you for the introduction.
How not to refer?
Here are some examples which I do not recommend:
- Texting your friends instead of explaining to them verbally the benefits you gained from financial planning. In our digital age, communications made digitally are often discounted in value. Given the general lack of urgency for financial planning, a further discount in the value of the text message could result in no more value!
- Giving your friends’ contact details to me when consent was not sought.
- Ask your friends to contact me and expect them to do so. This does not work most of the time due to the perceive lack of urgency in financial planning and procrastination.
Common reasons why your friends may not want to meet me
- “I already have an existing financial adviser.” Majority of my clients already have more than one financial adviser but they still engage me. Common reasons are wanting a second opinion and prefer an objective opinion given I am fee-based.
- “I do not like to pay a financial planning fee.” All financial advisers charge a fee. So, it is a common practice except that most fees are charged through commissions. But what I am doing is more transparent. Moreover, I can advice on non-product related financial planning matters like advising on overseas stocks, budgeting to buy a dream home, etc which pure commission-based advisers cannot.
- “I do not feel urgent / importance of financial planning.” Share with them your top two benefits gained through your interaction with me so that they can understand the benefits of financial planning from your perspective.
- “I do not have much money.” If this is true, they should be worried and should seek financial advice as soon as possible.
I look forward for your introduction!
What do you think? Leave a comment.