|Curian Makes A Common Mistake In Explaining A Drop-Off In Referrals|
|Wednesday, April 18, 2012 11:31|
A volatile or declining market is too easy and superficial of an explanation as to why clients are not referring. Yet respected money management platform Curian Capital, LLC, seems to have made this very mistake in explaining a referral dropoff reported by advisors.
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Curian just released its annual survey of 1,000 advisors, and 77% of advisors reported that acquiring new clients is their top goal for 2012. The survey noted, however, that advisors are receiving fewer referrals than last year.
A recent article about the survey quoted Mark Schoenbeck, senior vice president of marketing for Curian: “Clients' reluctance to urge friends or family members to work with their adviser is a function of the negative news and opinions about the economy. That tends to make them feel less likely to want to go out on a limb by suggesting that their friends work with their adviser.”
I disagree. Morevoer, advisors who examine the reasons underlying the drop-off in referrals are likely come upon a strategy less reliant on market conditions.
I agree with Schoenbeck is correct in assuming that clients put friendships, relationhips, and reputations on the line when they make a referral to a financial advisor. However, I do not believe that the ups and downs of the market elevate those risks — unless the advisor has established that delivering returns a primary aspect of his or her value proposition.
Many advisors have inadvertently done exactly this by failing to consciously design and communicate a better value proposition, and that is a mistake.
In fact, if you present a solution or experience that your ideal client needs or wants — assuming the solution is not consistently positive portfolio returns — prospective clients will be attracted regardless of market conditions. Clients and centers of influence will continue to mention you when they meet prospective clients who are looking to solve a problem in which you specialize. If you've explained your value proposition properly, the stock market's ups and downs should be of little significance to your ability to deliver on your value proposition.
If you find referrals disappearing when the market gets volatile or declines, don't blame it on the market. Take a look at your value proposition instead. It probably needs rewriting or a better communication plan.