You do a good job for your clients. The stock market has been volatile. You know they have friends that are feeling the pain in their portfolios. Why aren’t your clients setting up these introductions? Can you create a series of circumstances to change their behavior? Yes.
Why aren’t your clients sending referrals? There are many reasons, yet a simple one may be they do not feel any sense of urgency. Like a 24-hour convenience store, you are always open for business, accepting referrals at any time. Another factor is the perceived lack of capacity constraints. They assume a busload of referrals could turn up at your office, staff would bring out red ropes, chrome poles and line them up, ready to be served in order. Your capacity is seen as unlimited.
A financial planner in Pennsylvania told me about a great strategy to create scarcity and exclusivity in his practice. Here’s the strategy in a step-by-step format:
Step One: Study your book of clients. Determine who are your best clients, the ones you would like to replicate. What are their commonalities, like needs and asset levels?
Step Two: Consider a number. Ask yourself how many more clients like them could you handle? (You might say: 100 or as many as I can get!) Now, reconsider that question after applying three constraints:
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No one leaves. You cannot displace any clients. These new clients are in addition to your current client base. No one is sent to customer service or reassigned in the office.
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Everyone gets the same service. Some advisors have a multi-tiered service model, similar to an airplane with Business Class and Coach Class seating. Everyone is treated equally as a valued client.
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You are not adding any staff. You might assume you could increase capacity by hiring another assistant. Not in this case. You are sticking with your current staffing level.
Step Three: Reconsider that number. How many new clients, similar to your best clients, could you add before your service model was overwhelmed? From what I have heard, many experienced advisors arrive at a number below ten. Build this into your business plan.
Step Four: Call your best clients and have a conversation. Here are the highlights.
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You have done a business plan for the year;
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You have determined you can add (8) accounts similar to theirs to your practice;
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Before you add them in the traditional way, is there anyone they would like to recommend to be one of those eight new relationships?
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Stop talking.
What has happened? What is going through your client’s mind?
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They know you give good, attentive service.
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Now they know why! You aren’t continuously adding small accounts.
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They are motivated to act because they assume the eight slots will go quickly.
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They feel they are doing a favor to a friend making the introduction.
Something else happens, which I consider the “new issue phenomenon.” As an experienced advisor, you know when an IPO for a popular company is announced, many clients want to get some of the IPO. You might have 20,000 shares of potential orders (IOIs) yet you are only allocated 2,000 shares. You offer a client 1,000 shares, telling them you only got 2,000 in total. They want all 2,000 shares! You have seen this before.
Back to our scarcity and exclusivity scenario. You have explained you have eight slots. You have offered them one. If the “new issue phenomenon” takes hold, they wonder why they cannot have two slots for two friends! If they think there is high demand, they might even follow up with their friend, asking if they have met with you yet!
The Importance of Honesty
You cannot add lots of new accounts if this works out better than expected. Why? Because word gets around. However, something can change within those three restrictions in Step Two. You have added additional staff. A couple of clients moved overseas. You have created additional capacity. You must be honest and ethical.
My considering this approach, you have created both scarcity and exclusivity in your book. Would this strategy work for you?
Related: How To Become a Center of Influence