Three Point Approach For Continuous Referrals

I have referred to the recently released study Anatomy of a Referral by Julie Littlechild. There are so many parallels between her evidence of how referrals happen and the system that I use to coach financial advisors, that I am writing an e-book in which I review my process and related it to the specific conclusions of her study. I intend to post the e-book and make it available free of charge by the end of the month.

I will present a simple three point approach to creating a continuous stream of referrals. I will outline the three points in this post. Before I do, let me review Littlechild’s conclusions as she describes them in her article Secrets of Referrals.

The study separates clients into different categories based on how strong a client’s feelings are toward their advisor. The top category is “engaged.” Clients become engaged when they have a wide and deep relationship with their advisor, have their expectations for the relationship met or exceeded, and feel they have a meaningful influence on how the advisor provides service. How to engage clients is an important question because virtually all referrals received by an advisor come from this group.

The study also shows that clients refer when a friend or relative expresses a need for a solution or asks for a recommendation, not when they are asked by the advisor for referral. Therefore, the most productive route to referrals is to make sure your clients are engaged and that you have created in the client the environment in which a referral has a high probability of occurring. Then, when they are asked for a referral, there is the highest likelihood that it will materialize.

Here are the three points that will create a fertile field for referrals. Prepare this field and nurture your client relationships, and referrals will grow.

Be known for something. Make sure you understand what your clients believe you are good at doing, and what kinds of clients or financial issues you specialize in. You have heard this concept under many labels: a niche, target market, unique value proposition, strategic differentiator, competitive advantage. One key that frequently gets missed is to make sure that your clients understand what this specialty is. The biggest flaw I see in advisor marketing is the recommendation that you come up with this differentiator on your own. Much better to have the clients teach you why you are different.


Engage your clients. As noted in the study, engaged clients provide all the referrals. So, make sure you are doing everything it will take to engage as many of your clients as possible. These include determining what clients expect from your relationship and exceeding it, having deep conversations with clients especially regarding their goals and not just their portfolios, and keeping clients focused and on task in making progress on their financial plans.

Systematically solicit feedback and implement changes. Littlechild’s study found that a majority of engaged clients who refer had been asked for feedback, and believe that the feedback they provided made a real difference. Questions during client meetings, surveys, and advisory boards are all critical elements in a system of client feedback.

I will be writing more about how to implement each of these three points. We can be confident, based on Littlechild’s research, that when all three of these points are competently executed in a practice, a healthy flow of referrals is certain to come your way.

1 Comment

  1. Gregg LayerDecember 16, 2010

    It can seem obvious at times, but it is the little things that enable you to implement what the article says. In order to 'engage clients' and 'nuture relationships', you have to proactively reach out to clients on a consistent basis. E-mail, letters and other types of contact are very good, but actually calling and talking to them, or meeting with the client is what is most effective.


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