Advisers face barriers to getting client referrals

Worry over personal information prevents recommendations but hurdles can be overcome

Oct 18, 2012 @ 1:54 pm

By Liz Skinner

adviser, referral, client
+ Zoom

Advisers hoping to generate more referrals from clients have to overcome the underlying problem that people are reluctant to recommend their trusted financial professionals to others.

About 83% of clients say they are comfortable referring friends and family to their adviser, but only 4% of them actually take action and provide a successful referral, according to Gabriel Garcia, a director at Pershing Advisor Solutions LLC.

Clients typically don't fulfill referral promises because they worry that their confidential financial information could be shared and they are concerned that they will receive less attention from that adviser, among other barriers, Mr. Garcia said.

“They are not referring because they're not engaged with you,” Mr. Garcia told advisers attending an InvestmentNews workshop in Chicago on adviser profitability. “They need an experience that is creating more than just satisfaction.”

Advisers need to create an engaged client who uses multiple services the firm offers and has a deeper personal relationship with the adviser, Mr. Garcia said. Also, advisers should seek personal introductions, rather than just names and numbers, because the former are much more likely to result in actual meetings with prospects.

Mr. Garcia recommends that advisers tell clients how they handle referrals, thank clients for the recommendations regardless of whether they end up with a new client, and ask engaged clients for referrals repeatedly and consistently. More-reluctant clients should be approached about referrals more subtly, by “planting the seed” with marketing materials, newsletters and other communications, he said.

A uniform approach to referrals is crucial for advisory firm growth because 66% of all new clients come from referrals, according to the InvestmentNews/Moss Adams Financial Performance Study of Advisory Firms.

Many advisers, though, are hesitant to ask clients for referrals because they think it conjures up an unpopular sales image, said Armond Dinverno, co-chief executive officer and president of Balasa Dinverno Foltz LLC in Chicago.

“A formal referral process is only going to work for those who want it to work,” Mr. Dinverno said.

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