Financial Advisory: Converting referral leads to clients

Feb 6, 2017 / Dwaipayan Bose | 60 Downloaded |  10795 Viewed | | | 3.5 |  16 votes | Rate this Article
Financial Advisory article in Advisorkhoj - Financial Advisory: Converting referral leads to clients
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Referral is a tried and tested client acquisition channel in the financial advisory business. Some mutual fund distributors have been very successful in growing their business through referrals, while others have not been able to achieve any meaningful success. One main reason, I think, why advisors are not able to successfully convert many referral leads is their orientation to selling products rather than problem solving. Product selling orientation in financial advisory business is like having a solution for which the advisor has to find a problem.

We get telemarketing calls on our phones every day. I get calls (sometimes as many as 10 calls every day) asking if I am interested in apartments, home loan, personal loan, insurance policy, credit card or tour package. Since I am not interested in any of those products, I tell the caller that I am not interested before hanging up. Most people that I know have the same response for telemarketing calls and the conversion ratio of these calls is likely to be very low. The conversion rates are low because, these calls are essentially solutions looking for a problem. Why companies do telemarketing is outside the scope of our article, but financial advisors should ask themselves if they would be happy with 2 – 3% lead conversion ratio.

Finding the solution for a problem is much easier than finding problem for a solution. The question however is that, how will advisors know the financial needs of a new client, unless the client approaches the advisor with a problem? The answer in my opinion lies in the sales approach. Readers should note that, I have never been a financial advisor, though I have interacted with many financial advisors in various capacities (including that of a client) during the course of my career. My views are from the client’s (investor’s) perspective and based on my interactions with financial advisor. My friends and colleagues have referred a number of financial advisors to me across different locations where I have lived. Many of these advisor interactions were on the phone and some were face to face. Different advisors have different approaches, but there are some broad commonalities which I have observed.

Some advisors spent most of the time talking about themselves, the history of their practice, their key clients, the awards they won and other accomplishments. While some of it may have been useful information, the problem was that these advisors consumed most of the time that I had allotted to them in the appointment talking about them. At the end, there was no time left for discussing my financial situation and requirements. The advisors had nothing to take away from the meeting.

Some advisors spoke directly about products, explaining features and benefits in great details. If I told them that I have already invested in similar products, they would explain why the products they were selling were better than the products I had, without understanding my requirements. Such an approach raises concerns if the advisor has vested interests in selling a particular product and creates trust issues.

Some advisors spoke mostly about their relationship with the friends who had referred them. Some advisors had cultivated deep relationships with my friends, which is what financial advisors should do with their clients. This can work well with some prospects but not all prospects. Some investors are more interested in the advisor’s capabilities, like portfolio management, capital gains tax computation, online transaction capability etc. Some advisors in their zeal to demonstrate their deep client relationship sometimes divulged details of their clients, which my friends would not have wanted me to know. Client confidentiality is one of the most important tenets of investor advisor relationship. Compromising client confidentiality violates the trust of their clients and I would not like to do business with such an advisor.

Some more knowledgeable advisors spoke about capital market and why it was a good time for me to invest in equities. This is a good approach provided the timing is right, e.g. at the end of a bear market or deep correction, beginning of a bull market etc. Unfortunately, many a time, the timing is not right (e.g. bull market peaks) and this leads to trust deficit, even though most of the times the advisor is not to blame. Moreover, this approach works only if the client is convinced that, the advisor has sufficient knowledge of capital markets. Advisors should not assume that, they know more about the markets than the clients. Most of the advisors that I interacted with me had less knowledge of the market than I did.

Some younger and more educated advisors tried a scripted approach with me. Let me give you an example. Several years back, I agreed to meet with a Certified Financial Planner after a friend referred him to me. I had then just returned to India, after spending a long time in the United States and I was not fully up to date on the investment products that were available in this country. I had one very specific objective in mind for meeting with this young CFP. My retired father’s policy had matured and we wanted to invest the maturity amount in a scheme which would give my parents tax free income on a (more or less) regular monthly basis. The financial planner came well preparedand spent 10 minutes explaining why goal based retirement planning is important and SIP is one of the best modes of investment for retirement. He could have gone on much longer with his spiel, but I had to interrupt and tell him that, my father was already retired and he was looking to invest for regular tax free income. The advisor blamed my friend for not giving him a proper brief; something that I did not like. Anyway, now that he had the brief, I asked him, what are my father’s options? He said that, he would have to go back to his office, analyze various options and get back to us. We were hoping for a more informative response, but we were ready to give him some time to get back to us. Then he got back to his script and started explaining the benefits of goal based retirement planning through SIP. Probably, his intended audience was me and my wife, but by then he lost both of us completely.

I have shared several examples of where financial advisors were referred to me by my friends, but none of the interactions led to business relationship with the advisor. Through these examples, I wanted to highlight aspects of the sales approach I did not like. Let me now share with you an interaction that I liked.

A few months back, a friend referred a financial advisor to me. I was surprised that he referred this financial advisor to me because he knew that, for the last 10 years I have been doing business with only one financial advisor. My friend spoke very highly about this advisor and requested me to meet him once, even if I had no plans to invest through him. I met with this advisor in my residence. He was a very young man, in his early or mid twenties; given that my knowledgeable friend spoke highly of him, I was expecting a more experienced advisor. After sharing pleasantries, the advisor spoke very briefly of the purpose of his visit and his relationship with my friend. He was not trying to sell anything to me and the purpose of his was simply, “get to know each other”.

What impressed me most was the fact that, he already knew a lot about me and my family. Clearly, before meeting me, he had done some due diligence and gathered information about me. For example, he knew that, I was operating an investment related website and wanted to know more about it. When I introduced him to my mother, he was aware of the fact that, my mother was engaged with an NGO and had an engaging discussion with her. I am sure he would have gathered facts about my family from my friend, but I was impressed, because for the first time, the first meeting with a financial advisor was centred on my family instead of the advisor’s business accomplishments. Personal finance is, at the end of the day, more about the investor’s needs, and less about the accomplishments of the advisor.

The other thing that, impressed me about this young man was that, he was a very good listener; a quality that is relatively rare amongst salespeople that I usually meet. Most of them are in love with their own voice and believe that, gift of the gab will get them the business. If the advisor is a good listener and is able to engage the other party, he or she is likely to get more information about the client’s financial needs. That information, in my opinion, is more valuable to an advisor than trying to sell him / her.

In my various interactions with advisors over many years in different capacities, I have often seen that, advisors try to sell their own personal brand. An advisor’s personal brand is important, but advisor’s personal brand is not equivalent to an FMCG brand. An advisor’s personal brand is built over time, in course of sales and service interactions with clients. Focusing on the personal brand may not be very productive in initial interactions with prospects. The young advisor referred to in this example, was not trying to sell his personal brand. He was simply trying to engage with me and my family, to explore if there are financial needs that he could service. Engaging more with the prospect will give advisors valuable insights into the prospect’s financial situation, which in turn will help the advisor address specific needs which the investor may have.


Though the advisor did not get any business from me, his meeting with me was not a complete waste of time. Through the course of our interaction he learnt that, I was looking to sell a property that I had invested in a few years back once the builder hands over the property and that I knew many investors in the same complex,who were also planning to sell their properties in the next few months. I referred this advisor to the investors who I personally knew. Some of them have already made some investments through him and hopefully more will follow when they sell their properties. The young advisor was able to make our interaction useful for him because he was able to engage me and my family. Advisors should know that if a friend refers an advisor to me, built into the referral is some assurance of good service (otherwise why would my friend refer the advisor). Advisors should, therefore, in my opinion, not try to oversell themselves. Instead, before meeting a referral prospect, advisors should try to do some homework about the prospect. During the meeting advisors should focus on making interaction as engaging as possible, keeping the investor at the centre.

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