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How to Increase Asset Inflow Through Client Referrals

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Written by: Gordon McMahan

When Raymond James asks advisors for their number-one source of new clients, the answer most often is: Referrals from other clients. Industry surveys also show that client referrals are approximately three times more likely than centers of influence (COI) referrals to be the primary source of new clients.

Conversations with individuals referred by current clients are typically warmer, they become clients more frequently than non-referred prospects and as a consequence this is a primary means of building your net new asset flow.

The question is how can you maximize the flow of referrals from your clients? Ask many advisors about their referral process and they say they do a good job for their clients and hope they get referrals as a result. Similarly, clients often say that their advisor does a great job, so they refer him or her.

However, under the surface there is more going on as shown by at least two studies performed by consultant and researcher Julie Littlechild.

Essentially, there are groups that refer consistently and others who don’t. The studies also reveal that there are specific motivations and triggers that you can take advantage of along with active approaches to make it easier for others to refer you.

Step 1: Understand, Identify and Increase Your Engaged Clients

“The Anatomy of the Referral,” a study completed by Julie Littlechild’s firm, Advisor Impact, looked at practice metrics like client satisfaction and loyalty with the expectation that there would be a direct correlation to outcomes like referrals. The study found no such correlations.

Instead it found that engaged clients (the group that referred consistently) shared commonalities in three areas (the three C’s). They are right-fit Clients, having the right Conversations with their advisor, and being involved in the right Collaborative activities.

Right-fit clients refer – This “fit” boils down to personality and the deliverables you provide. The most common “fit” elements relate to things like common values, communications style, advisory style, investment philosophy, and background and interests.

Having the right conversations – One of the main opportunities to have these conversations is in client review meetings by focusing on increasing the depth of your personal relationship with your clients.

Collaborating with clients – The final differentiator of engagement is the degree to which clients are actively engaged in providing feedback to their advisor. More than any other group, engaged clients indicated that they were asked for input and that this was important to them. Client advisory boards are an ideal way to do this.

Step 2: Move from Passive to Active Referral Gathering

Even advisors who are successfully getting significant client referrals often stop here. They are good at creating client engagement (referability), but often aren’t even sure how they do it.

With engagement in place, many advisors just cross their fingers and hope for referrals. This is like planting an orange tree, watering it, giving it fertilizer and then hoping that you walk by after an orange falls to the ground, but before someone else picks it up!

With ripe fruit on the tree (engagement) wouldn’t it be more efficient to proactively reach up to pick it? That’s what we’ll discuss now – the when and how to make it easy for clients to refer or, even better, introduce you.

Related: 3 Tips on Business Cards for Financial Advisors

The Study Found Three Main Referral Triggers:

  • The most frequent was a friend or family member describing a financial challenge that the client knew the advisor had solutions for.
  • The second most common trigger was someone asking your client for an advisor recommendation.
  • The least likely trigger (by far) was a request from the advisor.

Name Sourcing and Introductions – Name sourcing allows you to gather some potential candidates and then look for ways to introduce them into the conversation. Asking a client about a specific person they know is much more effective than asking them to scour their memory for potential names.

The goal is to make this natural and conversational, not an interrogation. The Oechsli Institute recommends waiting at least a couple of weeks after discussing a name before asking for ideas on how you might meet that person.

– Kristin Chenault, Raymond James, Practice Management Specialist

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