Top Referral Tips for Financial Advisors

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Referrals are the lifeblood of a thriving financial advisory practice, often bringing in pre-qualified prospects who are more likely to become loyal, long-term clients. However, many advisors struggle with asking for referrals, fearing they might appear pushy or desperate.

The good news is that generating referrals doesn’t have to feel like a sales pitch. By implementing a few key strategies, you can naturally encourage your clients to recommend your services to their friends and family. These strategies revolve around providing exceptional service, building solid relationships, and making it easy for clients to refer you.

The challenge lies in finding the right approach. Stephanie McCullough is one of Investopedia‘s top 10 financial advisors and founder of Sofia Financial in Berwyn, Pennsylvania, which specializes in working with women planning for retirement. She told us that authenticity is important in generating referrals. “One time, I took two divorce attorneys to an expensive lunch as a thank-you for a referral. It didn’t feel authentic to who I am and how I work, although they were lovely people. I never got another referral from them! For me, the expensive gift route has not felt right or paid off,” she said.

Instead, McCullough found success in building genuine connections through networking groups. “I have belonged to countless women’s networking groups. By sticking with the ones where I feel most at home, I have found other women who are kind, generous, and engaged,” she said. This approach has allowed her to create meaningful relationships that more naturally lead to referrals than awkward (and expensive) meals.

So, how can you get referrals without seeming crass? Below, we explore practical ways to generate and secure referrals. You’ll find actionable insights to help you grow your business without compromising your professionalism.

Key Takeaways

• Referrals are the lifeblood of financial advisors, providing more clients and increasing revenues.
• The easiest way to get referrals is to earn them or simply ask for them.
• Doing a good job, going the extra mile, networking, and building an online presence all can help.
• Other ideas include offering incentives and discounts.
• Make an effort, and you’ll likely be rewarded, but avoid being overeager and scaring people off.
• Advisors must balance servicing their clientele and pursuing new business.

Keep Clients Happy

Another phrase for referrals is word-of-mouth. This is a sign that you need to be worth talking about to generate them.

By doing an exceptional job with your clients, helping them reach their goals while developing strong relationships, you increase the likelihood of them recommending you to their friends, family members, colleagues, and even people they pass on the street. Being skilled at your job is essential, but being likable is as important.

McCullough suggested getting others to talk about your service is particularly needed in contexts where what advisors do is misunderstood. “Advisors have a PR problem. The general public is very confused, with good reason, about what we do and who we serve,” she said. “They are not aware of the many different service models that exist. It’s still a common assumption that someone needs millions of dollars of investable assets in order to get the help of a financial advisor.”

A key part of developing referrals is developing good client relationships. It’s certainly something they seek. Research by Vanguard found that the “service” three-quarters of consumers want from a financial advisor is to “develop a connection/relationship.”

Ask

If you want something, often you have to ask for it. Don’t be worried about coming across like the stereotype of a car salesperson. Once you’ve built a strong relationship with a client you like, it can be OK to bring this topic up.

You don’t need to try to get referrals from everyone on your books. Choose those who may be particularly influential and have many great, wealthy contacts. And, of course, it’s important you approach the topic correctly and consider whether the client would be receptive to the idea first. The last thing you want is to annoy an important customer.

A subtler way to ask could be to give a trusted client not just one but several of your business cards so that they can pass them around to their friends who need financial advice.

Incentive Programs

Consider a referral incentive program that rewards clients for spreading the word. One approach is to create a gift program for clients who refer you to their contacts. When a referral results in a prospective client meeting, show appreciation by offering the referring client a complimentary financial review or a discount on future services. This encourages them to continue providing referrals and strengthens your relationship by demonstrating your gratitude for their trust and support.

Another option is to launch a referral contest. The client who provides the most actionable referrals within a specific time frame receives an enticing prize, such as a gift card to a popular restaurant or a free financial planning session. This friendly competition can generate excitement among your clients and actively motivate them to seek out potential referrals on your behalf.

Once you’ve chosen your incentive program, promote it prominently to your clients via email. Clearly outline the rules, rewards, and any applicable terms and conditions. By talking up your referral program, you remind clients that you value their recommendations and are committed to growing your business through trusted relationships.

Remember, the key to a successful incentive program is to strike a balance between offering meaningful rewards and maintaining the integrity of your referral process. Focus on creating a program that aligns with your brand, resonates with your target audience, and encourages genuine, quality referrals.

Make sure you follow all corresponding regulations when you offer gifts to clients.

Be Reachable Online

People spend a lot of time online looking for information and services, including financial advisors. Having a well-designed, professional-looking website and being active on social media are smart moves. Many advisors find it worthwhile.

It’s equally vital that you appear on all the financial advisor databases, especially if you’re already a member of a financial planning society since many people rely on them. List more than just your name and profession. Add details about your areas of expertise, success stories over the years, and anything else of interest.

Use Social Media

Use social media platforms like LinkedIn, Facebook, Instagram, and X (formerly Twitter) to get your message out. The more you link your clients through social media, the more your message can reach their friends and colleagues.

A 2023 Broadridge Financial Solutions poll of 400 advisors found that about 40% of the respondents got clients using social media, with about a third saying they planned to increase online marketing in the next year.

There are plenty of things to talk about. For example, you could share how your financial and estate planning services have benefited clients, comment on financial issues of interest, and use comments to your posts as a platform for extended discussions.

Important

As of 2022, the Securities and Exchange Commission’s Marketing Rule guides the use of testimonials and endorsements provided by others.

Join Organizations and Give Lectures

Contact local organizations and offer to give a lecture about the importance of financial planning, followed by a question-and-answer session. Bring business cards and materials for the attendees to read and take. Conduct a survey asking for feedback on your presentation and for permission to contact the people in the audience by phone or email.

McCullough suggested there’s much to gain from these meetings, even if it takes some trial and error to find the best groups for you and how to engage them. “In the early days, I had a lot of one-on-one meetings with women I’d met in a group setting. Some of those led to long-term collegial relationships, a few led to clients, and many went nowhere. But they were all time well spent. Today, I do those meetings by videoconference, so I can meet with people all over the country,” she said.

Professional Networking

Is there a lawyer or insurance agent you have worked with whom you admire? If so, trade contacts with that person or make a deal to approach all of your combined contacts as a team. You can offer a selection of services to a group of people with at least one person known and trusted.

How Do Financial Advisors Ask Clients for Referrals?

Financial advisors can ask clients for referrals in several ways, such as by offering incentives or, if the relationship is strong, simply just asking. Advisors should be careful when asking for referrals because a client may not want to share their advisor. Either of these could damage your existing client base, so it’s imperative to exercise tact when discussing referrals face-to-face.

What Is the Best Way to Get Referrals?

One of the best ways to get referrals is to offer discounted fees for your client. Another way is to speak at public engagements as a way to generate conversations.

What Is the Hardest Part of Being a Financial Advisor?

One of the difficulties of being a financial advisor is serving the clients you already have while building your practice by prospecting for new business. Many advisors depend on direct referrals for new business.

The Bottom Line

Referrals are one of the best ways to get more clients and increase revenues. If you are good at your job, your clients may pass on the message and tell people they know. However, sometimes it’s necessary to take further action, whether that be directly asking trusted clients for referrals or networking online or in person.

A good way to grow your business is to get your name out there and get people talking about you. Put in the effort, and you’ll likely be rewarded. Just make sure your attempts to grow your business don’t upset clients or suggest any compromise in the services you offer them.

Read the original article on Investopedia.