Back to school means back to basics with referrals

We hope that you enjoyed a great summer filled with family and friends and the activities you enjoy most. With Labor Day behind us, we know this time of year means back to school. And whether you have children or not, somehow, you never outgrow it.

So let’s get back to work—and get back to basics—to make sure that the all-important fourth quarter is a strong one. I’m talking about referrals here, and collectively, we are potentially leaving a lot of money on the table.

According to The Kitces Report 2024 Marketing Study, building your business with client referrals has the highest satisfaction, highest ROI, and highest adoption rate across advisors. It’s also one of the cheapest and most attainable methods since you start with your existing client base. The research shows that, in most cases, client referrals are also highly profitable for a firm. The share of new client revenue from referrals ranges from at least 50 percent in most firms—to other firms that attribute around 90 percent of their growth to this approach. That’s the good news.

The bad news is that most advisors aren’t fully realizing all the benefits of their client relationships. The Kitces Report research also revealed:

• Only 28 percent of advisors said they were proactive in soliciting referrals from their clients; that means almost three-fourths of advisors are not asking for referrals. This is elementary in terms of business development, and it’s important to ask the people you are helping if they know of anyone else who could benefit from your services.
• Given the low number of advisors asking for referrals, the fact that only 17 percent of advisors implement this referral strategy is understandable, especially when only 10 percent say the process is well-defined. Could this be related to the fact that only 20 percent of advisors claim that their ideal referral is clearly articulated?

There are countless opportunities for advisors to grow, so taking advantage of them is critical. If you aren’t actively discussing referrals at every meeting, it’s time to make a change.

And remember: asking for referrals doesn’t mean pushing a piece of paper across the desk and having your clients write down the names of 10 people who you can prospect. While I know many advisors were trained to do this, it isn’t an effective method for gaining new clients.

Instead, consider these additional approaches.

Set up a Google alert. When something significant happens to key companies in your area, you’ll be notified immediately. For example, if Boeing announces that it’s looking to eliminate head count through early retirement packages, use LinkedIn or your CRM system to pinpoint which clients currently work there. Reach out to discuss their job security and offer to be a resource to any of their Boeing colleagues who may be offered the package. You could ask, “Would you like me to analyze the retirement package for any of your colleagues so they can better understand what they are gaining or giving up?”

Offer a second opinion. The markets have been volatile, and interest rates are uncertain. Knowing this, you can remind clients that you can be a source of reassurance to the friends and family they care about. Chances are, they know someone who is worried about their finances. Consider asking, “Would you like me to take a look at your brother’s portfolio and see how it’s positioned?” or, “I’d be happy to conduct a complimentary portfolio review and offer any reassurance I can.”

Articulate your value. Doing this will help clients know the people you help and the problems you solve. For example, if retirees can maintain their lifestyle throughout retirement due to your careful planning and investing, make sure you discuss it. Then, ask them if they know other retirees who could also benefit from your disciplined approach, or find out if they have friends worried about inflation, taxes, or leaving a legacy, and offer to be a resource to them.

While focusing on the referral opportunities within your practice might not be the most thrilling marketing initiative, it is one of the most effective. So, if you are looking to grow, go back to basics and start asking for referrals!

As always, make sure to consult your firm’s compliance policies before engaging in any marketing initiative.