26 Mar 2018

Does referral marketing still work for financial advisors? viewpoints from financial planning experts

Finding prospective clients is arguably the biggest challenge in being a financial advisor. It is the responsibility of a financial advisor education provider to show you how to find prospects, and in so doing, a good financial advisor course will show you how to tap the power of referrals.

But are referrals still as powerful as they are made out to be in transforming a financial advisor’s career? Some industry observers say they aren’t, while some continue to espouse the value of building a referral network. Take a look at both sides of the story and see whether referrals will be able to help you advance along your financial advisor career path.

These experts say the power of referrals has waned.

FINANCIAL ADVISORS WOULD DO BETTER FOCUSING ON MARKETING STRATEGIES INSTEAD.

After pointing how newly minted financial advisors have to work twice as hard because they have no one to refer them, financial planning expert Michael Kitces says while referrals might have been the main source of prospective clients once, they aren’t so, anymore. This expert adds that referrals really only come in on their own, which means actively pursuing them isn’t really all that effective.

Instead, advisory firms have more to gain from strategies that don’t involve referrals, such as digital marketing efforts which include using social media and search engine ads. Some advisors have also managed to land clients using more traditional advertising such as print and radio ads and direct mail.

HAVING TOO MANY REFERRAL RELATIONSHIPS IS A BAD IDEA.

Yet another financial planning expert, Philip J. Kavesh says that if your referral source is an estate planner or something similar, that source will expect you to refer them in return. If you have too many sources, there’s a chance that you end up “returning” too little to each source, to the extent that none of them will prioritise you as their own No. 1 source of revenue.

A financial advisor would therefore do better to nurture just one major source of referrals, so that that source will make you their major source of revenue, too. It’s also far easier to maintain just one relationship instead of several.

SOME PEOPLE JUST DON’T REFER BECAUSE THEY DON’T WANT TO RISK MAKING A BAD RECOMMENDATION.

Writing for Brokers Clearing House, Dan Allison points out that making referrals is a habit that people either have or don’t. Speaking in relation to developing referral relationships with the likes of attorneys and accountants, the writer says those that don’t make it a habit to refer others may do so to avoid possible damage to their own careers.

JUST LET THE ROBOTS BRING IN THE REFERRALS.

Meantime, FinancialPlanning’s Bruce W. Fraser says technology has made it possible for financial advisors to not have to ask for referrals. Pre-programmed, “robo-referral” systems can get leads for you while you sleep, which is great for advisors who hate having to ask their clients to refer them.

Technology is also being used to send clients content which they can share with prospects (i.e. family and friends) whose contact details they record and compile in the process. Marketing automation platforms and other digital marketing tools are also becoming more popular methods of sourcing leads.

IF REFERRALS HAVEN’T BEEN WORKING OUT FOR YOU SO FAR, YOU SHOULD JUST STOP.

So says Stephen Wershing, author of the book, “Stop Asking For Referrals” and the founder of The Client Driven Practice. This expert points out that just asking for more referrals, or asking in a “nicer way” is not going to get people to refer you. Continuing to do so even after a string of lacklustre results is simply an exercise in futility.

Yet, most of these same experts suggest that referrals are as powerful as ever.

YOU HAVE TO MAKE THE NECESSARY CHANGES TO MAKE YOU “MORE REFERABLE”.

After saying the aforementioned, Wershing also goes on to say that if a financial advisor wants more referrals, he will have to start thinking about what he can change to make more people more likely to refer him.

Think about how you can differentiate yourself from the thousands of others who might also be after your prospect. This includes figuring out how you can provide more value, or what else you can do to help your potential client make better, more cost-effective financial decisions.

YOU CAN USE ROBO-ADVISORS TO HELP, AND NOT NECESSARILY AS A REPLACEMENT.

Fraser acknowledges that many financial advisors still look to their clients to ask for referrals, and points out how going digital can help them do that. Technology provides measurable value, which advisors can use during client demonstrations which could encourage clients to make referrals.

MAKE SURE POTENTIAL REFERRERS UNDERSTAND THE SERVICES YOU PROVIDE AND THE VALUE YOU OFFER.

Allison suggests that it is possible to build a successful referral relationship with accountants and attorneys. To obtain more referrals, he recommends making it clear to these potential referrers who a financial advisor’s ideal clients would be, and exactly how financial advisors are able to help. This could help to overcome their reticence in referring their clients to you.

REFERRALS AND NETWORKING ACTUALLY STILL WORK.

Kavesh likewise recognises that having numerous referral relationships does work for some, and that it is possible to improve on those relationships to make them more rewarding. For his part, while Kitces says that referrals alone may no longer be enough, he seems to suggest that marketing, networking and other community-centred activities may be added to a financial advisor’s referral-sourcing efforts.

These experts propound that referrals are what power a successful financial advisory career.

RELYING ON “ACCIDENTAL REFERRALS” ISN’T THE SAME AS SYSTEMATIC REFERRAL-SOURCING.

James Pollard, author of “57 Marketing Tips for Financial Advisors” points out how 58% of high net worth investors found their financial advisor through referrals, and that when it comes to millionaires, 70% of them tend to refer their advisors.

Prospects are 400% more likely to become your client if you were referred to them by a friend, and a referred client has a 16% higher lifetime value than one who wasn’t referred. In spite of these statistics, only 10.7% of advisors take advantage of opportunities to ask for referrals. Most financial advisors could therefore actually do better in tapping the power of referrals.

NETWORKING OUTSIDE OF THE FINANCIAL ADVISORY FIELD IS ESSENTIAL TO YOUR SUCCESS.

Financial Career Options talks about the importance of networking between professionals involved in financial services— certified financial advisors, planners, accountants and attorneys can all work together and this in turn can widen your referral network.

You can meet these professionals, for instance, during financial advisor training programs or certified financial planner courses, and draw up referral agreements or arrangements with them.

MAKE IT WORTH THEIR WHILE TO REFER YOU.

Writing for Forbes, consultant Russ Alan Prince recommends offering incentives to professionals in a position to refer affluent potential clients. These incentives include trading wealthy clients, paying introduction fees and revenue-sharing. Direct financial incentives, while attractive, are generally more difficult to put into practice and have been shown to be actually less effective.

TO NEVER RUN OUT OF PROSPECTS, YOU NEED TO ACHIEVE REFERRAL MASTERY.

PPP Academy founder and financial advisor education and training expert, Chris Chan says, “No matter how successful you think you already are, you are just getting half of the results if you ignore the power of referral systems.” He adds that effective referrals could literally save you years of hard work and acquiring the experience you need to help you in your financial advisory career.

While it may take some time to achieve referral mastery, Chris assures struggling financial professionals that the quality of referrals is going to get better over time. If you’re willing to put in the necessary time and effort, you are bound to reap the rewards of your perseverance.

REVOLUTIONISE YOUR REFERRAL SOURCING PRACTICES AT PPP ACADEMY’S REFERRAL REVOLUTION WORKSHOP IN SINGAPORE OR MALAYSIA. GET IN TOUCH WITH US TO FIND OUT HOW YOU CAN FAST-TRACK YOUR CAREER AS A FINANCIAL ADVISOR TODAY.

REFERENCES:

HTTPS://WWW.THEADVISORCOACH.COM/7-CLIENT-REFERRAL-IDEAS-TO-HELP-YOU-GET-MORE-REFERRALS.HTML
HTTPS://FINANCIALCAREEROPTIONS.COM/REFERRAL-BUSINESS-FOR-FINANCIAL-ADVISORS/
HTTP://BCHLIFE.COM/WHY-DONT-CPAS-AND-ATTORNEYS-REFER-MORE-OFTEN/
HTTPS://WWW.FORBES.COM/SITES/RUSSALANPRINCE/2017/09/27/HOW-FINANCIAL-ADVISORS-CAN-INCENTIVIZE-OTHER-PROFESSIONALS-TO-DELIVER-WEALTHY-REFERRALS/#6135833A26AB
HTTPS://WWW.KITCES.COM/BLOG/DEATH-OF-REFERRAL-MARKETING-FOR-FINANCIAL-ADVISORSIN-INVESTMENT-NEWS-2016-FINANCIAL-PERFORMANCE-STUDY/
HTTPS://WWW.KITCES.COM/BLOG/IS-GROWING-YOUR-PRACTICE-WITH-REFERRALS-REALLY-A-BEST-PRACTICE/
HTTP://ULTIMATEESTATEPLANNER.COM/2016/10/01/MULTIPLE-FINANCIAL-ADVISOR-REFERRAL-RELATIONSHIPS-ARE-A-BIG-MISTAKE/
HTTPS://WWW.FA-MAG.COM/NEWS/DEVELOPING-A-REFERRAL-MARKETING-STRATEGY-11952.HTML
HTTPS://WWW.FINANCIAL-PLANNING.COM/NEWS/ADVISORS-DONT-NEED-TO-ASK-FOR-REFERRALS-ANYMORE

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