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How Referrals Juice Up Financial Advisor Marketing, Part 2

By ClientWise | July 26, 2012

For most financial advisors, it’s a given that referrals are the main driver of your wealth management practice. We discussed the pluses and minuses to this approach in our blog post earlier this week, The Pros/Cons of a 100% Referral-Based Financial Advisory Practice.

So if a wealth management practice that is solely or mostly based on referrals is the Holy Grail, what do you have to do to get there? Even if it isn’t possible to obtain every client via referrals, the benefits of expanding your basis of referrals is clear.

That’s because clients who are referred – particularly by Professional Advocates™ and Loyal Client Advocates™ who know your business well – tend to be better-qualified and thus easier to convert to clients. They also fit better in your business and remain with your practice for years. There is a better chance that they themselves will become Loyal Client Advocates and bring even more referrals in the future.

From our proprietary research into top-performing wealth management practices, we’ve observed three necessary and sufficient conditions that need to be in place to truly build a referral-based practice. Whether this practice is entirely based on referrals or primarily based on referrals isn’t the critical issue; what is important is developing a culture and processes around referrals so that they grow as a percentage of your overall business development efforts.  

Here are the three conditions:

  1. Your practice is referable today. Your practice must currently provide excellent service to your clients and create perceived value beyond what other wealth management practices are offering. Referral sources want to see that excellence in place before they put themselves on the line to recommend you.
  2. The proper referral processes are in place. Simply asking for referrals in a passive manner isn’t going to build a referral-based practice. One of the glaring examples of this passive approach is adding a phrase like, “We value and welcome your referrals!” to your website, business card and emails. This is an obvious statement, and not very likely to incent a valued referral source to spring into action. For a 100 percent referral-based practice to work, you must proactively build systems and processes that ensure a pipeline of continuous referrals. This includes identifying and tracking all referral sources, ascertaining the most engaged clients and other professional advisors who are providing referrals, conducting client surveys and building a distinctive and thorough new client onboarding process.
  3. Identification of an ideal client type. To get targeted and qualified referrals from Professional Advocates™ and Loyal Client Advocates™ you must have identified your Ideal Client Type. You’ve got to paint a very detailed portrait of your ideal client so that your advocates know whom you work with and why and the value you bring to those clients.


Regardless of where you are in the process of building a referral-based practice, there is always room for improvement. It’s a process that can work for any size or shaped financial advisory firm, which will ultimately result in acquisition of more (and better-qualified) high net worth households served, more assets under management, as well as creating the capacity within your practice to allow you to spend more time in front of your best clients.


For a complimentary ClientWise Learning Tool on how you can derive more referrals from a network of centers-of-influence and professional advocates, please see below:


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Topics: Client Acquisition Business Development

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