If financial advisors want clients to refer prospects, they need to educate clients about the concept, and some advisors have a formal process for doing so.

“Early on in my career, I was asked by a top client whether I was taking any new clients,” says Ronsey Chawla, an advisor at Per Stirling Capital Management LLC in Austin, Texas.

“This was a wake-up call of sorts for me,” he says. “From that point onwards, I included the discussion on referrals as part of my expectation-setting process with new clients.”

The topic is an agenda item during the formal onboarding exercise, and then it is supplemented at critical points during the relationship, Chawla says.

At the outset, it is important for his clients to be educated about his “story, brand and the ideal client,” he says.

“My advisory practice caters primarily to those in health care, management consulting and technology, so the right client is key,” Chawla says.

Although clients will likely want to refer advisors who are doing an effective job, proactively educating clients about referrals and the referral incentive process is a smart idea, says Terrance Martin, managing partner at Tranquility Financial Planning LLC in McAllen Texas.

“I think it important that clients understand the type of customers that the financial planner wants to work with in order to minimize potential embarrassing situations where the referred client is not a good match for the firm,” he says.

Martin also thinks that it is best to strike while the iron is hottest, when a prospect becomes a new client.

“By making it a part of the onboarding orientation, I think can go a long way in ensuring that the overall request does not come off a bit desperate,” he says. “After the onboarding process is complete, they are almost always in the ‘wow, I’m impressed with your service’ stage and are more likely and willing to share their experience with their family and friends.”

Arthur Stein, a certified financial planner and the president of Arthur Stein Financial LLC in Bethesda, Md., doesn’t have a formal process for educating clients about referrals, but he will sometimes ask them, “when a client has seen what I do and liked it.”

“I will ask more than once but not on a regular basis,” he says. “I will typically say something like, ‘If you have friends and colleagues who need help with these issues, please let me know and I will contact them.’”

Katie Kuehner-Hebert is a freelance writer in Running Springs, Calif. She has contributed to American Banker, Risk & Insurance and Human Resource Executive.

This story is part of a 30-day series on how to generate the best referrals.

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