Financial advisors who provide a great level of service are not the ones who get referrals, according to one consultant.
Advisors need to make an extra effort to yield referrals, according to Julie Littlechild, founder of Absolute Engagement, a research and consulting firm that works with financial advisors and others.
“Even clients who say they are very satisfied with your services do not necessarily refer you to others,” said Littlechild, who was a speaker at the BNY Mellon, Pershing Insite2018 conference in Orlando last week.
According to surveys of the financial industry, 55 percent of clients are likely to refer their advisor to others and 33 percent say they actually do make referrals, she said.
“But 4 percent is the real number of clients that advisors get from referrals,” she said, adding that there are ways to improve that number.
“You can create a good financial plan for a client, but you also can help the client understand the psychology of retirement in the context of life: That’s leadership,” she said.
“It is important to keep referrals top of mind for your clients. Many clients think it is too risky to make referrals: What if the experience turns out badly?” she said.
Littlechild examined the motivation behind those who do make referrals. Forty-one percent said they made a referral because a friend was having a problem—including cases where the friend did not ask the client for a financial advisor, but told the client about the problem.
“What we want to do as human beings is to help,” she said. If an advisor talks with a client about referrals, he or she is more likely to remember that request when a friend needs help, Littlechild said.
“Help your clients spot this referral opportunity because we want to add you [as a financial advisor] to that conversation,” she said.