Most financial advisors significantly underestimate the amount of time it takes to cultivate referrals, says U.S. financial firm, Prudential Financial Inc., in a new report.
The report found that clients take 4.8 years on average before they are comfortable recommending their financial advisor. Prudential notes that this is more than twice as long as the 2.1 years that advisors said they thought it would take. The paper also reports that 56% of clients have provided referrals, and another 36% say they would consider it.
Additionally, the report says that clients who are more likely to refer their advisors rated their advisor as ‘excellent’ or ‘very good’ at: setting realistic expectations about investment returns (86%), delivering on what was promised (86%), achieving strong investment performance (79%), and providing fee disclosure (80%).
Apart from returns, clients were more likely to provide referrals if they had a written financial plan. Clients who’d received advice about generating steady retirement income and preserving savings are also more likely to provide referrals, it says. Stability of the firm was also cited as a factor in the referral process. It notes that “advisors who are able to draw upon ‘in-house’ expertise to assist with unique planning issues, such as advanced tax planning or health care, were more likely to secure referrals.”
“There are clearly a number of steps financial advisors can take to increase the likelihood that a client will make a referral,” said Rodney Allain, senior vice president and national sales director for Prudential Annuities. “While the value of performance and communication are well understood, the importance of the length of the client relationship to building trust and referrals may be underestimated. Tracking relationships and following up with clients when they are most receptive to secure referrals is one additional dimension to the referral picture.”