Ep #2: Are You Stepping Over Gold By Ignoring Referrals?

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Erika Pauly, welcome to the Advisor Summit. So happy to have you on. I'm excited to dive in. Today's topic of referrals.

I'm excited to be here. Thanks for having me.

Of course. So let's go ahead and dive in. I think there's a lot of knowledge and information around referrals that kind of gets missed and kind of overshadowed by these big shiny ideas of tv, radio, all these other things.

So let's.

I think it's really important to kind of dive into referrals, why they matter. And I'll let you kind of be the expert on that. But why do you think referrals tend to get overlooked by as the business grows? Especially I feel like most offices, when they start, that's the foundation, that's really where it begins. And as they grow, it tends to get overlooked. Why do you think that is?

Yeah, it's a good question. So, yes, I just read an article about just how referrals behaved last year and they, they dropped. So from an aggregate standpoint, they, we did not see near as many referrals as we did like in 2023. And so I got to thinking, which is why I wrote the article. And it's a good question. I think a lot of people were like, I wonder why it would drop. So this is just me and just from looking at data for many, many years. But I think that I see it in the offices as they continue to grow. One, I think referrals feel boring and old. Like that is what initially got them to start growing. That is initially what their book was made of, was referrals. And that's hard. Like asking friends and family to start your book. Just a hard thing to do. And so I think a lot of advisors feel like once they start marketing, they're like, oh good, that's kind of out of the way. I can let that sit and let it just do its thing while I go chase these other things because it was boring and it was hard. So they just want to like move past it. So I think that's part of it. I think the Other part is inconsistency. So it helped get them to where they are. But they also see that that's a hard thing to keep consistent, like month after month. And so to them it's like, you know what? I'll let that kind of be what it is over. And I'm going to go chase the things that I know that I can get X amount of leads per month. And so it makes sense to me why it can get forgotten. It doesn't mean that that's okay or healthy. But, you know, those, those two things really speak into it. And I, and I get why that can happen for some.

Well, if you think too, I mean, most people only. You only know a set number of people, right? Like, there's only so many referrals that you could even ask for business or anything of that nature. So I think. Do you find that most firms then kind of tend to look to their clients for referrals beyond their circle of influence? Yes.

And that is intimidating, right? Like to like, you might have a referral that came in that you knew, but then ask your clients to say, hey, is there anyone else that you know is just a hard thing to do. A lot of people get nervous about it. Even Kitsis recently has been having speakers on and they've been talking about some like automated systems, which we'll talk about here in a little bit on just how to help with getting that a little bit more as a process. But yeah, people just don't love asking their clients for names. I feel awkward.

I get that. What are some creative ways businesses can stay top of mind with clients to generate more referrals? Kind of as we are talking about client referrals, how do they generate that?

So one a compliant. And I want to make sure like that is an afters right there. So a compliant referral program, making sure that you're within what you need to be doing. But having a program where either it's certain events every quarter or a way that you do ask for referrals again, I know people don't like doing that, but it's something that is consistent. Automation is a huge one. I what is out of sight, out of mind is exactly what happens with referrals. So if we have a process in place that we know is working, that we do something quarterly, having educational events for clients where they can bring a friend quarterly, and that is always on the calendar, that just helps. And some advisors get super bummed out because there's like two people, people that show up. Right? Like, yeah, they wanted A room full of referrals. Neck. We're never doing that again. That was so embarrassing. But the truth is you just got to give it time because they're inconsistent. Some quarters you're gonna have two people show up and some quarters you're gonna have 15. We just watch advisors stop the whole program when you have one that doesn't work. So I'm a huge believer in make it a process and make it consistent and just stick with it every quarter or every single month so you don't really have to think about it.

Yeah, I know a lot of firms also do like events around certain holidays, like, you know, Galentine's day for, for February. And that can be also really fun and generate kind of new business as well. And I want to say two for advisors. Yes, maybe only two people showed up, but maybe they're really high value people. And in referrals you typically close much easier and quicker and it's more of a stick closer, sticky type of close rate. So I mean even those two could be huge. So yeah.

And I want to piggyback off what you said about like the Galentine's. That's another idea of it's important for advisors to know your avatar client and also to know who you're serving right now. Like what is your book made up of? Is it, you know, widowed women? Is it, you know, businessmen? Is it business owners? Is it married couples who like to do outdoors and stuff? I mean they're, they're generally like a feel that certain advisors attract. And if you can know that and you know what your clientele exists with, then you can do refer events based on that. Right. Like a hiking group. We have some clients who have like a bereavement group of like, you know, losing spouses because of that age group that they serve. So there's so many ways that you can take that. You just have to be a little bit more creative and really see who are we serving and what do they need? What would they be excited to do? But yeah, was a great example.

I think niche market is such a hot topic. I feel like that is the two topics that every podcast is talking about is AI and then finding your niche like that is just you can't serve everything, everybody, and you're not meant to serve everyone. So I love that. Have you seen businesses successfully use referral generated profits to kind of fund the bigger marketing strategies? Do you have any examples around that?

Yes. So what we typically say from like a benchmark standpoint, we want 30 to 40% of someone's business to be coming from referrals and existing clients and that will help fund anything. Where we start seeing, you know, red flags or issues is when that drops below. And the truth is existing clients kind of get lumped in with referrals. And I know we're talking mostly about referrals in general, but I want to at least like plug existing clients as well because they kind of go hand in hand. The amount of business that's coming from referrals and existing clients is a litmus test on how healthy you are. As certain for us as servicing your people. You know, if you are not writing an existing client business, why would they refer other people to you? Because you aren't seeing them and you aren't mining them consistently to, to, to serve them and write more business from them that, where that can help them or whatever it is. And if we can get 30 to 40% of our business coming from those two places, that immediately funds the high ticket items that are, you know, radio, dinner, seminars, tv, like the big, big things. If you aren't writing business from existing clients and referrals, where does that money come from?

Right.

Like that, that's a tough, tough place because the first year or two, if anything, that's high ticket takes a minute. Like it takes a minute to make money there. And so yes, I'm a huge believer in 30 to 40% of the business coming from existing clients and referrals knowing that that profit is going to speak into the new task that you're trying.

Yeah. And if you're not tracking anything, I feel like for advisors that's a great place to start. Like just start tracking what you're doing with existing clients. Actually track that. Advisor is launching an existing client tracker. If anyone's interested in that, you are more than welcome to reach out@helloracktheadadvisor.com and we can get that to. It's, it's a huge underserved market that I feel like again, because it's not fun, it's not the shiny idea, it tends to kind of get left behind with referrals. So I think that's an excellent point to make, Erica. For sure you talk about businesses chasing kind of these big time marketing strategies in the article, which we'll also link in the notes of this podcast. But what is. Do you think that the shift is always necessary for growth? Kind of talk to some advisors about that.

That is such a great question. I saw that on your questions. I'm like, oh, so big ticket items. When I'M talking about big ticket items. I'm talking about like dinner seminars, radio, tv. Those are probably the biggest ones that we're seeing.

Would you love educational? Oh, yeah, okay.

Yeah, I would say they can be, but you're not necessarily doing food. And a lot of those are driven digitally and so they're not as expensive. You know, webinars are not as expensive. So what I'm talking about there, I just want to make sure, like the definition is accurate. Like dinner, seminars, radio and TV are usually the big ticket items. No, people do not have to use them. You know, educational workshops can, can build authority. Just like TV builds authority. The difference is the demographic that you're reaching. And I think that comes into play where we need to have a strategy. And I'm going to mention this over and over and over because strategy really matters. We can't just throw a bunch of money at the wall because education workshops might bring in a little less people, but they're typically really high net worth. Yes, they're like do it yourselfers sometimes, or they're the engineer type that just take a really long time. The average case size for those is fairly decent. The difference with TV is we see a pretty high average case size for TV people, but that takes two years for it to grow and for that market to really trust you and see you as an authority. Whereas educational workshops, you can, it's very transactional. So you can like have the education workshop. They may take a little bit longer. They might be a little bit of a different odd demographic, but you're making money on them right away. Yeah, TV takes a minute. Tv. I just did a review with a client who's been on TV for two years. They had like three leads in the first year, 12 leads last year, and they're figuring them out, but that's 15 weeks, two years. You know, it's not like they got some like, massive amount coming yet. And so the expectation there on the big ticket items needs to be very, very clear. What is our strategy? Are we expecting it just to build authority for more people to come to, you know, our webinar because they've seen us on tv? Or is it that we're expecting people to come straight from a TV two minute look like whatever those are?

Yeah.

I just think people don't fully understand what they're wanting to get out of it. And that's a really, really important thing to nail down.

Yeah.

And again, back to your question of do they have to do it to grow? No, but you have to understand what it's going to look like if you want it to help you grow again. Back to the TV example, they're only getting 15 more leads and it's hundreds of thousands of dollars. But their seminars and their workshops are doing really, really well. So we're not getting ROI from tv. Yeah, but we're getting it from the education workshops and the seminars that we're doing. So they are gray and they do mix. Yeah, but I don't think there's a right or wrong way to do it. I don't know if that answers your question.

I love the gray. It's like, yes, but no. And it really, again, it goes back to what the advisor wants. Like, what is your vision for your practice? Like, is it that you want to be on tv? Because some people just don't feel comfortable being on tv. Some people just don't want ever to do that and that's okay. Like, that does not make you an unsuccessful advisor in any capacity. I also think there's just such great resources now for TV that talk to your imo, talk to your fmo, like, know what is able to be provided because it could be a really comfortable thing where you think it's this huge daunting and they make it so simple. So always utilize your resources. I think it's so important, like just, oh, there's just such massive growth there. So I'm very interested and I will.

Say last year we did the 2024 aggregate study. TV was finally in like a positive ROI. It wasn't for a couple of years because it was new and everyone was trying it and it didn't have a positive roi and it does now. So we're seeing growth there. We're seeing people kind of figure out the demographic, the leads act crazy in the sales cycle too. So again, back to like correct expectations.

Yeah, yeah. And also on that note too, the aggregate study, if you want that resource, the 2024 aggregate study. Anyone listening, feel free to reach out again. HelloCAD advisor.com and we'll get that over to you. It's amazing. Erica did incredible. It's just incredible information. So we're excited to share that and want it to be really helpful thing in this industry to give benchmarks. So as we're talking kind of about high cost marketing strategies like TV and radio, do you find any kind of common themes or mistakes that businesses make when they move into these markets? Maybe it's unmet expectations, maybe it's not setting the standard of kind of what they want, the branding side of things. Kind of what are some common mistakes that you encounter?

Yep. So you nailed it. It's the realistic expectations all the time. Couple of reasons for it though, and it's not necessarily their fault. One, I don't think there's a ton of data around it and any advisor who's been to any event with other advisors just know, oh yeah. And I heard it and I heard what people say and they're like, oh yeah, you know, I'm doing it, I'm getting all these leads and they' really high net worth. And that can be true. It isn't true for everybody. And it isn't necessarily like what national information is saying. And so far like the aggregate study we did, I don't know of any other place that did it where it's like cut the same way. Like there's big national studies, but it's other advisors who have submitted their information. The way that we did it was everyone is sliced and diced the exact same. So it's very fair. And when I come in and I say like, I just said like last year was the first positive ROI for tv. Hopefully that helps people like bring their expectations way down when they started. I will say for radio. Radio has been around a long time and I think people think it's antiquated and old, kind of like they do with dinner seminars. But radio has sat at a consistent like above $2 ROI year after year after year. I'm actually in the middle of doing a five year study on dinner seminars, radio and tv. No dinner seminars, radio and what is it the other one? Workshops maybe of what did they do? Like what was the overall roi? How much percentage of business and. And radio has actually been more consistent than anything.

Wow.

Above a two dollar roi. And okay, that's interesting for someone to know.

Yeah, my money would have been on seminars for sure. Just I think I know.

And seminars, like there's. They've been like they've all, they've all been profitable to be like none of them have been in the red, which is right for people to know. But seminar just was like really high and then Covid happened and then it like jumped up again and then it's kind of. So it's kind of been weirdly volatile. But radio has been like this consistent $2 and above ROI. Like that's. Yeah, that's awesome. And but again I think people are like, no, radio is old. I don't want to do it anymore. And what I tell people is go look at, I mean go look at our data if you want. Don't take someone's anecdotal opinion or just what's happening in their office, because your expectations will probably be set incorrectly. And I think that's the biggest issue I see is unclear expectations or way too high expectations or no strategy. What is your strategy? If you're going to go into radio, you're going to go into tv, you're going to start dinner seminars. What is the strategy there? Is it to bring in 10% of the leads? Is it to bring in 80% of the leads? Like, don't just throw money at it and say, yeah, it happens. It's a really, really bad way to approach it. And I just did an annual review the other day where someone had like 17 different types of funnels. And I'm sitting here like, I don't know.

We're just.

We're kind of just trying everything. And that's just not. That's not a strategy. That's you throwing money at a lot of things. And how are we going to measure success if we don't know what we're trying to make it look like? So that's my big thing, is how are you going to measure success with it and then go from there?

Yeah. Measurable goals is everything. I mean, you can again, if you don't track it, and that's. Just start tracking. I think that's. I'm glad that at least they're utilizing. Track that advisor. Yeah, just start tracking. So, you know, and I'm glad. I mean, I also want to encourage advisors. Don't be afraid to try new things because you might really make it work, but you can't be good at everything. I think is a big takeaway also. So really find, hone in on what you are great at. Really capitalize on that and just know your expectations and your strategy. Have those set predetermined before you even get into this idea. Because it really, once you're in, you start to, you know, maybe it's working. Maybe I can put more money into it. I don't want to quit this, but it's not making money, but it will. So just have those expectations and goals and know when, when, when it's time to exit if it's not working. So yeah.

Yeah. Kind of to piggyback on that too real quick. The. The marketing side like to. To track if it's working, but that it's so loud and the bill comes every month for that and it's going back to like, that's why referrals then start struggling right like, yes, we're telling you to track it. We're telling you to spend all this money, but that bill comes due every month. And so it's. It's daunting. And then it's like, we don't even. We kind of forget about the referrals. So have the referral and existing client process nailed down pat?

Yes.

Now then go into the big marketing funnel. Okay.

Yeah, yeah. If someone kind of. On that note, if someone's lost focus on referrals, they've just been kind of really dialed in on these shiny ideas. They've lost the referrals. What's the first step to get back on track? What's like an actionable item today that someone could put into practice to get referrals back into their book of business?

Yes. I would go back to that 30 to 40% mark on where business is coming from. Like, just examine that today, like, right now. Where. What percentage of business is coming from existing clients and referrals? If it's below that, my 5% rule is what we call Erica's 5% rule. Like, try to get it up by 5%. If it's in 20, try to get to 25. Yeah. And I don't care if it's existing clients or referrals. Like, just do one or the other, because again, that's a litmus test on how well you're servicing your clientele already. You service your existing clients more, you're probably going to get more referrals. But if it's below that, that's where we'd go back into, like, those events. Start planning quarterly events, start having a process in place for it. And honestly, not pause on your events or on your marketing things. But I would. I would do a big, deep dive into the referrals and existing clients because they will pay for that and make the price tag for these less daunting if you know it's coming from a safe place.

Yeah, yeah. And I think referrals will always be foundational. Do you agree with that? I mean, they're always going to be. They should. Do you anticipate that, like, as TV and radio and dinner seminars continue to grow, do you anticipate the 30 to 40% changing? Or, like, do you think there will come a day where that potentially would be decreased, or do you think that's just going to be standard always?

I think it'll be standard always. I mean, last year it was the Nation hit like, 60% between the two because of the way interest rates hit and people who did Annuities, they were doing a lot of replacements. But I mean it was sky high, actually was sky high in 2023 also. So for two years now that percentage has been 60%. And I think the only time it will be like that is when interest rates do what they've done. I think it will self correct in 2025 and it'll kind of like drop back down. But I don't personally think it's super healthy to have anything below 30% again because that's telling you if you have, if you're healthy, if you're a healthy advisor, you're servicing your clients and they're telling people about you, it doesn't really matter. If you have all these fun marketing things with all these leads coming in, eventually they will become existing clients and they will or they won't refer people. And so you have to think of like the downwind effects of how well you're. You're being represented to your, your clientele.

Yeah, yeah. And again, I think referrals, it's hard to ask for that. But getting a system in place that's so important on really what you can do today to get that started also is having a system and having, you know, processes around that so. Well, awesome. That is all the questions I have for you except our classic closer. Where are you tracking personally or professionally? What is your big trek moment in the upcoming months?

I know there's always somewhere that I'm tracking.

There's always, I'm like, You probably have 94 answers for this because you're always doing something like just insane. Same to the rest of us. But it's amazing. So I know it's wild.

So on the personal front, we are moving. So we've been in Arizona for the last 11 years. On the. We have decided to go back to our home state of Colorado. So that's a big undertaking. We are really excited about that. But that's a, that's like a big one. And that's coming up early summer. So that'll be really fun. And then professionally, I think track that advisor. We just have a lot of really, really cool pivots that we're making just in becoming the authority in this space. We have a data storytelling course that is coming out. Like we've done some beta tests for it, launching in the summer. Yeah. So that'll be super fun. And then we also have an educational library that's going to be rolled out this year for people who just need resources. I just, I've kept so much stuff in my brain for so long, doing this for so long. And we have just decided to be like, nope, we're opening it up. Let's let people see. Let me do studies. I'm doing all these studies. So places I'm tracking. But it's all fun and it's exciting and I'm so passionate about all the things. So, yes, that's where we're going this year.

Perfect.

Well, we're rooting for you always in all of your endeavors. Thank you so much for just sharing about referrals. This has been hugely helpful. I hope everyone that listens you can find something, just one actionable item to take away from today. So thanks, Erica. We'll talk soon.

Thanks for having me.