Referrals may not be the practice builders they once were

Are financial advisors relying too heavily on referrals to grow their practices?

A new study says that very well might be the case.

There is a disconnect between how financial advisory firms market themselves and how consumers choose their advisors, according to that report, from digital marketing firm Ficomm Partners, titled “The Great Marketing Mismatch: 2024 Financial Advisor Growth Marketing Study.”

Based on responses from 437 financial advisory practices, 45 percent of investors select their advisor through digital marketing, yet only 29 percent of firms prioritize digital marketing as a client acquisition strategy. Conversely, the survey showed 47 percent of firms rely primarily on referrals, even though only 29 percent of consumers require a referral when hiring an advisor.

A demographic shift in the population is the primary force rendering referrals less valuable, the report suggests.

For example, 60 percent of clients over age 60 will only hire an advisor based on a referral, it found. When looking at the under-44 audience, however, only 17 percent say they required a referral, while 57 percent hired their financial advisor based on digital marketing.

"Referrals will always be an important channel for growth, but as the consumer's buying practices change, financial advisory firms must adapt by integrating strategies that meet consumers where they are," Ficomm CEO and co-founder Meg Carpenter said in a statement.

Rajat Deva, head of marketing at Savvy Wealth, said referrals still play a key role in client acquisition, but those are part of a broader, integrated strategy rather than a primary driver.

“While referrals bring in high-quality leads, relying exclusively on them limits growth potential,” Deva said. “Instead, we empower our advisors with tools to create useful, value-driven content, and then work in tandem to make that content discoverable. This in turn subtly encourages referrals without explicit asks, aligning with how clients organically share experiences today.”

As for his 2025 marketing plans, Deva said his emphasis will be on further developing his digital marketing infrastructure in order to “put the power” in advisor hands rather than his own.

Meanwhile, Abby Salameh, chief growth officer at RFG Advisory, agrees with the survey that client acquisition strategies are changing with demographics. When seeking to find younger clients, for example, digital marketing methods seem to work best.

“Paid social ads and webinars coupled with digital marketing seems to attract this group and get them engaged. But when talking about pre-retirees, we find that in-person seminars and events are actually a very high producing approach for winning new clients,” Salameh said.

Added Salameh: “Referrals are always still a large percentage of new client acquisitions but more so with 50-plus-year-old client versus younger clients. Fifty percent of our new clients typically come from referrals.”

Finally, Angel Gonzalez, chief marketing officer at Snappy Kraken, said he is not shocked or confused over the perceived misalignment. In his view, it's more about the difference between what has historically worked well and what advisors have leaned on for a long time, and where things are headed.

“Client referrals work great today, but what's working now won't work forever. A smaller number of prospects today under 44 need referrals before choosing an advisor. Relying solely on referrals is a shrinking strategy,” Gonzalez said.

The most successful firms are building a hybrid approach, he said. They are maximizing today's referral opportunities while developing tomorrow's digital presence.