CONFERENCES

Don’t forget the little things, like saying thanks. But be ready with the research, too.

    It’s common knowledge that referrals are the best way to build an advisory business, especially if you want more wealthy clients. In fact, in a recent study we conducted with more than 6,100 advisors representing a broad range of financial businesses such as securities, investments, insurance and accounting, referrals played the most influential role in the growth of such businesses last year.

Client referrals were cited by 43% of practitioners as the source of their best new clients. Professionals, such as trusts and estates attorneys, were the most effective method for 38% of advisors, and 16% benefited from other advisors with whom they have a revenue-sharing arrangement. In total, 97% of advisors surveyed added wealthy clients to their practice in the past year through some form of referral.

Cultivating referrals from these sources should be thought of as three discrete activities, using a process that was developed around the unique aspects of each group. To better understand the process of client referrals, we turned to our research with wealthy individuals and their advisors. We compared their perspectives on a number of issues to identify what’s most important to clients, why certain activities get better results than others and the topics where disconnects are most likely to occur. We leveraged these insights to diagram the steps that lead to a successful client referral. They are:

1. Set expectations. Don’t blindside your clients with a request for a referral. From the start of your relationship, they should know that they will play a very important part in how you grow your practice. Let them know that you will come to them for introductions to the family, friends and colleagues who can benefit from your oversight and guidance—only after they are satisfied with your service.

2. Create loyal clients. It’s not worth wasting time—not yours or your clients’—if there’s no chance for a referral. You should know if a client is unhappy with you, with the relationship, with the investment performance or with your service, and take the steps to address those issues before asking for a referral.

3. Focus on previously identified affluent prospects. It’s much easier for a client to take action if you do all the heavy lifting in advance. Take the time to research their social circles and professional networks to identify suitable prospects for your business. By doing so, you can ask them for referrals to specific people and they don’t have to rack their brains to identify an appropriate candidate for your services.

4. Ask for the referral. Once you’ve identified the client and the prospect(s), be direct and ask for their help. Too many advisors lose out on new business opportunities by waiting for their clients to be proactive. Remember: You are the only person that wakes up every morning thinking about your business.

5. Say thank you. We are appalled by the number of wealthy clients who say they never hear from their advisors after providing a referral to a friend or family member. Take the minimal amount of time needed to place a call or jot a note of thanks recognizing the faith your clients have placed in you by providing a referral.

6. Inform your client how the meeting went. By introducing you to an important member of their inner circle, a client is putting their reputation on the line too—so don’t leave them in suspense. Give them an update on how your meeting with the referral went. No confidentialities need be breached; simply tell them the status of the relationship, such as “We really hit it off and are planning to get together again next week,” or “I appreciate your help, but it looks like it’s not the right fit for either of us.”

7. Say thank you again. Regardless of the outcome, thank your referring client again. This reinforces your appreciation for their efforts and sets the stage for additional referrals down the road.

Hannah Shaw Grove is an authority on high-net-worth individuals and the executive editor of Private Wealth. Russ Alan Prince is the president of Prince & Associates Inc., the world’s leading high-net-worth research and consulting firm.