Editor's Note: This is the first in a series of stories on strategic business development in the ultra-affluent universe.

When it comes to the importance of referrals in reaching high-net-worth markets, the good news is that nearly everyone is on the same page.

In late 2010, the research firm HNW found that 90% of advisors include referrals as part of their client acquisition efforts. Similarly, advisory members of the Family Office Exchange attributed 95% of their new business to some form of referral. Hannah Shaw Grove's research (conducted with Private Wealth editor-at-large Russ Alan Prince) reveals that roughly 85% of individuals with net worths exceeding $20 million said they found their advisor by referral.

The not-so-good news about referrals is that this is where the unanimity appears to end. There are many types of referrals but not a lot of clarity about how they differ in execution and effectiveness. For instance, the Family Office Exchange identifies four referral sources: Current clients are responsible for referring 34% of new business; internal business partners, 29%; centers of influence, 16%; and personal networks, 16% (Figure 1). The data shows that the types of referrals used vary depending on an individual's net worth and priorities; the wealthier and more private a person is, the less likely he is, to rely on social contacts for guidance. Wealthier clients will instead turn to a trusted authority they already know, such as a tax attorney or a business manager.

An equivalent phenomenon is occurring among advisors and wealth management providers. A narrowly focused advisor-one who earns 80% or more of his income from a single product category, say investments-typically relies more heavily on client referrals. A more sophisticated provider, such as a wealth manager or multifamily office that delivers a broad range of integrated services, gets most new business from professionals in complementary fields, such as accounting, concierge medicine or P&C insurance.

Follow The Leader
The economic crisis has helped to spotlight weaknesses in the advisor-client dynamic and create a more discerning consumer. Individuals no longer respond to generic or nebulous messages and, instead, are seeking someone with whom they can have a deeper emotional connection. The savviest professionals adapted quickly to the changing circumstances, but the implications for the rest of the industry are far reaching. The result is a paradigm shift in how private wealth management organizations will think about and pursue growth.

By isolating the techniques used by advisors and firms with the highest client retention and satisfaction levels, and then comparing them to the preferences and priorities of ultra-affluent households, we can begin to identify a best practices benchmark for referrals. What we've learned is insightful and can help you focus your efforts on the people and opportunities with the greatest probability of success.

What's Wrong With This Picture?
ADVISOR: I'm glad you could join me for golf today, and even happier that my team and I could help you beat the S&P last year. If you're as pleased as I am, I hope you'll consider recommending me and my firm to a friend or associate.

CLIENT:  Absolutely! No one comes to mind just now, but let me give it some thought and I'll get back to you.  

Although asking for a referral is proactive, most advisors shift into a reactive mode once the request has been made and let it languish. While rounds of golf and fancy dinners certainly help build relationships, they alone will not result in consistent referrals. A request like the one above transfers too much responsibility to your clients, leaving them with the task of finding and evaluating leads. Not surprisingly, very little ever comes of these vague and open-ended appeals. As a point of comparison, if you took the initiative to identify and investigate someone in your client's network-Alexei, the owner of nine fast food franchises, for instance-and then asked for an introduction to him by name, it would be much easier for your client to respond positively to your request. Simply put, the lack of structure, process and specificity surrounding most referrals undermines the effort.

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