Michael Kitces on Building a Referable Profile

Julie Littlechild:
Welcome to another episode of Becoming Referable, the podcast that helps you become the kind of advisor people can’t stop talking about. I’m Julie Littlechild and on this week’s show, Steve and I speak with Michael Kitces. If you’re not familiar with Michael, you may be alone because he has earned an extraordinary following in this industry. Now, Michael is someone I would describe as intensely curious and that drives his passion for learning, which, it turns out, is a huge benefit for the industry. Michael is the Director of Wealth Management and a Partner with Pinnacle Advisory Group. In his spare time, he writes the Kitces Report, an advanced educational newsletter for financial planners and attracts 200,000 unique visitors or more, every month to his blog, The Nerd’s Eye View. He’s one of the most active people I know in this industry, and it’s probably worth pointing out that he holds eight degrees or designations.

In this episode, we focus in on where referrals fit into to the overall marketing strategy for advisors and we go deep on leveraging thought leadership and content as one of the most effective tactics to drive growth. Let’s face it, Michael knows a thing or two about how to make that work. With that, let’s get on with the interview.

Michael, it’s such a pleasure to have you today. Welcome to the show.

Michael Kitces:
Thank you, I’m excited to be here. Love talking about all thing referrals and referability, so I’m looking forward to the conversation today.

Steve Wershing:
Awesome.

Julie Littlechild:
That’s a good entrée, because I was going to say, you write about a lot of different topics, right? I don’t know if you always remember what you write, but I’m going to take you a few years back in your blog. You’ve talked about referrals a few times and —

Michael Kitces:
Hopefully nothing I’m going to regret too much here.

Julie Littlechild:
Yeah, that’s right, yeah. Do you remember when you said. . .

Michael Kitces:
This is going to be the greatest hits up there.

Julie Littlechild:
That’s right, there you go. But I did read a post going back a few years and I thought it was quite a lively post, in that you were taking a shot at something that was just traditional wisdom. You essentially said, is referral marketing really a best practice? More specifically, you said, “Look, the truth when you look at the data is that growing a practice by referrals is simply all that’s left over for most advisors when they don’t otherwise have marketing strategy at all.” You’ve talked about that theme a couple of times in a couple of different ways. I’d love to know, just to kick us off, today where do you see the importance of referrals in that overall marketing mix for advisors?

Michael Kitces:
I have to come at this from a couple of directions. I think the first distinction I make, is there’s a huge difference between passive referrals and active referrals. Passive referrals, frankly, is a domain that most of us live in as financial advisors. It’s sort of the fundamental wisdom and approach, serve your clients well and they’ll like you and they’ll talk about you to their friends and then you’ll get more clients, and we grow our businesses through inbound passive referrals by just trying to serve our clients. I distinguish that from what I’d call active referrals, which is having some kind of proactive strategy about how that’s actually supposed to happen beyond just saying, hey I’m going to serve my clients well and hope that they refer me. Whether that’s- you do a very outbound referral networking approach or you ask every client for referrals or, just you have a combined marketing strategy that’s meant to drive a volume of inbound referrals to your niche or expertise.

It’s the passive referrals that seems to still be the dominant mode in the industry and is the one that I take most issue with. That so many studies, we still see one study after another, the data comes out and says the most common way that advisors generate new business is through referrals and then you go deeper into some of the industry benchmarking studies and the data’s been really stable for years. The typical advisory firm spends one to one and a half percent of its revenues on marketing. Most firms that I know that even spend a little bit on marketing, their primary marketing event is really just a client appreciation event where you bring in existing clients and you hope that they extra, extra love you to give you some referrals.

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