If your firm is performing at the industry average for client retention, you're retaining 95.5% of your clients on a year over-year-basis. Translated, 95 out of every 100 of your firm's clients chose to remain with the firm. One could infer that a healthy percentage of those clients are "satisfied" with the firm, its responsiveness, resource offering and performance.
So here's the question; "Have you asked your satisfied clients for a referral?" SEI found in a fall 2011 "Quick Poll" that only about 20% of advisors surveyed indicated that asking clients for referrals was a "regular routine." What is particularly vexing is the fact that across FAs of all sizes, active and passive client referrals are the source for more than 60% of a firm's new client acquisition success. When you look at these two findings in tandem, it would suggest that as important as referrals are to building an FA practice, firms are simply not leveraging referral marketing to enhance their client acquisition efforts.
In light of the industry's client retention success rates it would appear as though there is tremendous upside potential to be had for a firm and its advisors that are willing to ask their clients' for referrals. Take note, various advisor impact studies over the course of the last few years have found that 90%+ of clients are willing to provide referrals. Advisors should take heed from the words of the early 20th century English novelist. G.B. Stern;
"Silent gratitude isn't much use to anyone."
In addition to clients, do not forget your professional alliance network, those CPA firms, attorneys, insurance brokers and estate planning lawyers that your firm works with. Tiburon Strategic Advisors found in a study on financial advisor sales and marketing that almost all CPA firms and attorneys make financial advisor referrals. Interestingly, those attorneys specializing in estate planning are dealing with clients that have average investable assets of $2.7 million.
Further, in a first-quarter 2012 study conducted by Charles Schwab among high-net-worth (HNW) investors, a majority of those HNW investors surveyed first learned of their financial advisor through referrals. Of note, they also ranked their advisor as their 2nd "most trusted" professional after their doctor. The industry data points clearly support the role of referral marketing as an effective and efficient means of acquiring new clients.
So how can you jump start your firm's efforts on this front? The answer is clear: digital media. At Evolutionize, we assist financial advisory firms with their marketing and client acquisition efforts. When we first engage with a client firm, invariably we see that they have not fully leveraged their digital media "tool kit" to support the firm's referral marketing efforts. From e-mail signature blocks to .html newsletters to their website or social networking activities we discover a virtual void of referral marketing activities. Remedying this oversight is easy, quick and inexpensive.
While passive in nature, an advisor's email signature block is one of the most visible elements of their contact management program. Simply adding a line to the signature block letting clients and associates know that you both appreciate referrals and consider them to be among the highest compliments that they can pay you is an excellent means of soliciting referrals. Similarly, incorporate a "Forward to a Friend" function into your .html newsletter template to encourage readers to share this content with relatives, friends and associates. By also providing those recipients an opportunity to subscribe to your newsletter, you can successfully fuel prospect database.
Creating and maintaining a professional website with current, thought provoking investor content, tools and resources is a critical component of encouraging clients to refer your firm to others. Like it or not, individuals do judge books by their covers. A dated, static website that doesn't distinguish your firm and boost perceptions of your "brand" can be a detriment to a client considering referring you to friends and associates.
From a social networking perspective, focus your efforts on LinkedIn. This fast-growing, business networking social media site provides ready access, a means to communicate and a mechanism for soliciting referrals from two important stakeholder groups: 1) Professional Referral Partners 2) Clients. To optimize your efforts in this area you must invite your clients to join your LinkedIn network. By connecting with your clients, you gain access to their network of connections. This allows you to track client family members and friends career successes and life events (i.e. marriage, having children, relocations) that could trigger an opportunity to introduce your services. Additionally, you can identify those individuals who you would like your clients and professional alliance partners to introduce you to. Do you target specific segments such as healthcare professionals, airline pilots or business owners? Join a LinkedIn group to gain access to prospects within those target segments.