Building deeper client relationships and cultivating client engagement are key to generating referrals, according to new research from Advisor Impact Inc., which has offices in Toronto and New York.
But a significant gap still separates clients’ and financial advisors’ perspectives when it comes to referrals, Advisor Impact president Julie Littlechild told attendees of the FPA Business Solutions conference in Cambridge, Mass. today. While most clients rate their advisors highly, consider themselves loyal to their advisors and would feel comfortable referring friends to their advisors, relatively few actually provide referrals.
The new research updates Advisor Impact’s Economics of Loyalty study conducted in 2008, which explored “what clients need, want and expect from their advisors,” according to Littlechild. The most recent study, entitled Economics of Loyalty: Anatomy of the Referral has an emphasis on client engagement.
The research report divides clients into four levels of satisfaction: disgruntled; complacent; content; and engaged. It found that engaged clients — not surprisingly — are most likely to provide referrals.
“In 2010 we wanted to go deeper into what client engagement really meant, on what differentiated engaged clients and, therefore what the implications were for advisors in building relationships,” Littlechild said. “And we wanted to do a much deeper dive on the issue of referrals.”
Littlechild’s research report broke out referrals into what she identified as their component parts: who provides referrals; why these clients provide referrals; when they provide referrals; and how many referrals they provide.
Most clients who provided referrals said they did so to help a friend solve a financial challenge or to reward an advisor for serving them well, the survey revealed. As little as 2% of referrals came about as a result of the advisor asking for a referral.
If asking is not the most effective referral strategy, then what is?
“We can’t talk start talking about a referral strategy to the exclusion of talking about the depth of the relationships,” Littlechild said, “because that’s where it’s going to start.”
Littlechild offered three steps to cultivating engaged clients as part of a referral strategy:
1. Start with the right clients.
Your intake process is critical to ensuring you have a good fit with your clients. But you must go beyond the measurable data such as assets, geography and time horizon, to such issues as the client’s level of knowledge, core values and communication style. “Your deepest relationships, your most respectful relationships — those are the clients who will refer.”
2. Have the right conversations.
Engaged clients have deeper connections with their advisors and expect more contact. But that means more than pumping out more emails and holding meetings more frequently. You must have meaningful meetings with your clients. Engaged clients tend to make comments such as: “My advisor added value and provided leadership.” You also should learn to tell stories about other clients you have helped, which can encourage clients to recommend you to friends in similar circumstances.
3. Ask the right questions.
Never miss an opportunity to find out what your clients need. Ask for feedback. You will find that most clients, even the disgruntled, want to be heard.
For more on the study, visit: http://www.advisorimpact.com/canadiansite/economics_of_loyalty.html.
IE