Advisors need to rethink their assumptions about referrals, says a prominent industry expert.

“I’m so convinced most advisors are sitting on a mountain of opportunity when it comes to referrals,” says Julie Littlechild, founder and CEO of Advisor Impact. “They just need to think about it in different ways.”

CHICAGO - The old assumptions are mostly wrong, Littlechild told financial advisors at Envestnet’s second annual Advisor Summit conference in Chicago on Thursday.

For example, advisors typically think if loyal clients are satisfied, Littlechild says, they will give referrals to show their appreciation and to help the advisor grow his or her business. In fact, most clients give referrals because they have a friend with a financial problem and they want to help find a solution, Littlechild says.


And even though 88% of clients  her firm surveyed felt comfortable providing a referral, only 28% actually did so, and of those a mere 2% proved to be successful.

Satisfaction with an advisor isn’t enough to drive a referral, Littlechild maintains. What are really needed are “engaged” clients who “place a high value on advice relative to the fees they pay and see the advisor as a proactive leader in their life.”

These engaged clients provide an average of two referrals annually to advisors and “provide almost all referrals made across the industry,” Littlechild says.


How do you actually generate those referrals? Here are some tips from Littlechild:

  • Find a ‘triggering action’: These could include when a client's friend asks for a recommendation or when a client's friend describes a financial challenge; the advisor should ask the client for a name, to follow up.
  • Explain your value in plain English: You need to be able to explain how you can help solve a problem -- and do so in a way that ties into your client’s own conversations. Instead of the usual boilerplate mission statement, for instance, tell clients that you specialize in working with women who are suddenly single and want to preserve their financial independence, so clients will think of you when a friend gets a divorce. Or if you help small- to midsize-business owners structure and execute exit strategies, clients will think of you when a friend is selling a business.
  • Research yourself: Contact one or two clients and ask for a favor -- the opportunity to talk to them about their experience working with you. Ask them why they selected you as their financial advisor. If your clients were asked to describe how you helped them, what would they say? What made them decide to get financial advice, or change advisors? Was there a problem they wanted to solve?
  • Plan an event for a targeted group: Broad is bad, but specific is good, Littlechild says. Events should be for a group that has something in common -- like single women, small businessmen or retirees.


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