Advisers face barriers to getting client referrals

Oct 21, 2012 @ 12:01 am

By Liz Skinner

Financial advisers who are 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 said that they are comfortable referring friends and family to their adviser, but just 4% of them said that they 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, he said.

MULTIPLE SERVICES

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

Advisers need a client who uses multiple services the firm offers and has a deeper personal relationship with the adviser, he said.

Also, Mr. Garcia said, 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.

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 that it conjures up an unpopular sales image, said Armond Dinverno, co-chief executive and president of Balasa Dinverno Foltz LLC in Itasca, Ill.

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

lskinner@investmentnews.com Twitter: @skinnerliz

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