Be careful about giving referrals

by Ary Rosenbaum
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Ary Rosenbaum - The Rosenbaum Law Firm P.C.

“When I introduce you, I’m gonna say, “This is a friend of mine.” That means you’re a connected guy. Now if I said instead, this is a friend of ours that would mean you a made guy. A Capiche?” – Al Pacino in Donnie Brasco.

As a retirement plan provider, you are often asked to give a referral to other retirement plan providers. If you’re a financial advisor, you might be asked for a referral to a third party administrator or an ERISA attorney.

The problem with referrals is when they come back to bite you. A request for a referral by a client is something based on trust, they trust that you know who is good and who is not. When you give a referral to a good provider, you look that much better in the eyes of your client. If you give a bad referral, you look terrible and I have run into providers who have lost business just because of a bad referral.

So it’s important that any referral is based on first-hand knowledge of a provider’s competence. Referring to a provider because they may refer you back in business is a bad idea and using a referral, as some sort of tryout to network with other providers isn’t either. Your word is your bond and a bad referral is almost the same as breaking your word because it’s a break in trust. Trust is one of the most important things that a client should have in their provider. So be careful with referrals.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ary Rosenbaum, The Rosenbaum Law Firm P.C. | Attorney Advertising

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