Although client referrals are the single biggest driver of new business, only 20% of advisors ask for referrals systematically. Worse, a majority indicate that they can address referrals only occasionally in client meetings. Only half of advisors always place a call or send a thank-you note to a referrer. Approximately 14% of firms – even those at the top – indicate that they follow a formalized referral process.
Since markets have become more volatile and client referrals have declined as a result, advisors need to focus on reinforcing referral behavior in their client base. Yet taking a proactive approach to marketing and referrals is difficult for even the most successful firms, and few advisors know where to start much less how to implement such a system effectively.
How can advisors tap into this potential opportunity? What works best to capture client referrals?
There is, indeed, a wide range of approaches to this – from indirect questions in client communications to client events to asking directly. The clear standout is discussing referrals in client meetings and calls. This is by far the easiest and most cost-effective way to generate referrals as it allows advisors the time and opportunity to educate current clients on the type of referrals they seek.
An overwhelming majority of fee-based or fee-only advisory firms view themselves as service organizations and are often reluctant to ask for referrals. They say they don’t want to appear to be “selling” something or to put clients on the spot, and they don’t want to look like they need business.
Over the past several years, we told many advisors to pass a blank piece of paper across the table to clients, while confidently saying, “Can you give me the names of five people you know who…?” Even very successful advisors expressed that this simply didn’t feel “right” to them. What we like about this approach is that it often works because it gives advisors a simple, systematic way to ingrain referral requests into their business behavior. The point is that finding some way – whatever that may be – to make referral-seeking a part of the business process will yield far more referrals than not asking or asking occasionally.
Professional referrals are another good way to grow business; however, many advisors become frustrated with this method because they don’t see immediate results. Working with Centers of Influence (COIs) such as Certified Public Accountants (CPAs) or attorneys is a long-term process. Nurture these relationships to establish credibility and build trust with the COI. And ensure you are working with the right professionals – meaning, those that share a similar service ethic, target the same clients and are open to reciprocal referrals.
Market to professional referral sources in the same way you market to clients – direct contact is most effective, and ongoing communication with professional referral sources is clearly important to maintain the relationship and articulate to the COI your ideal client profile to ensure you are attracting business best suited to your firm. It may take a series of lunches or meetings to get to know each other well enough to establish comfort on the part of the COI. Expect to start out giving more than you receive. Once you build a rapport, however, the tide may turn. Successful professionals, just like you, are busy. You may be able to help by giving them useful information or support in serving their clients.
Having referral sources know and truly understand what you do as an advisor – and for whom you do it – is important in building a strong referral strategy and system. The better the referring party understands your value proposition, your ideal client and your process, the more conviction he or she will convey to prospects. This reinforces your position as the expert and the “go to” resource for prospective clients.
By focusing your time and attention on a few key areas in business development, such as establishing COI relationships, and following a documented process, you should quickly realize increased return on investment for the time. The efficiency gained by establishing and following these processes will ultimately help you reach your goals.
Matt Matrisian is senior vice president & director of practice management at Genworth Financial Wealth Management. He is also the author of The Power of Practice Management, which the above blog is exceprted from.