Six Steps to Developing an Effective Referral Strategy

Most Advisors will say that their preferred method for growing their practice is through referrals. And there are plenty of reasons for that. First of all, referrals are far less costly than other methods of marketing and prospecting. Initial calls are warmer (particularly when there is a personal introduction), closing ratios are higher, and they are much more likely to yield ideal clients. When your best client introduces you to family, friends and associates, you are likely to see a strengthened bond with that client. And most importantly, clients themselves prefer to work with a financial professional who has been referred to them by someone they trust.

Interestingly, while Advisors prefer referrals, many acknowledge that they don’t receive as many as they would like. There are numerous reasons for this. Many Advisors have never developed a strategy for promoting referrals nor have they implemented any type of referral process. Often Advisors shy away from discussing referrals with their clients because they perceive the conversations as too risky—what if the client says no? They may fear damaging their own relationship with their client. Other Advisors admit that they don’t know how to position referrals correctly—they don’t want to appear “needy.” Lastly, many Advisors say that they have not been able to clearly describe the type of client that they are best able to help nor teach their clients exactly what to say to a friend or colleague. Most if not all of these concerns can be overcome by developing and then implementing a carefully planned referral strategy.

There are six steps to developing an effective referral strategy:

  1. Ensure your referability. Exactly how referable are you? Is the process you use to advise your clients comprehensive, consistent and customized to the needs of your ideal clients? Are clients able to recognize and appreciate your experience, expertise and empathy? Do you have high standards for consistent client service, ongoing client communication and recognition? What do you do to exceed their expectations and generate not only satisfied but loyal clients who are advocates for you and your practice?
  1. Define your target client. There are several ways to do this. You can examine the profiles of your current ideal clients for common traits and concerns. You can consider your own background, experience and expertise and then develop a target client profile for which you are a good fit. You can consider groups of potential clients in your area who may be underserved and with which you can connect. Ideally, your target clients should be part of networks so that they interact with each other.
  1. Decide who to ask. First of all, your focus should be on your current ideal clients, as they would be most likely to know others like themselves. But depending on your target market, others of your clients may know them, as well. For example, if you target architects and you learned that a client was in the process of having a custom home built, you might initiate a conversation about how your practice focuses on specific needs that architects have, followed by a question about his or her architect.
  1. Plan for the client discussion. This is a conversation that you should think about and specifically plan for. Some of the best times to bring up a discussion of referrals occur when the client has made a comment about how much they appreciate some aspect of their relationship with you or when the client mentions the name of someone he or she knows who may fit your target market. The more naturally the topic comes up in the conversation, the better. If you make it a practice to continually ask about your clients’ interests and friends and acquaintances, the more opportunities will present themselves.

When you hear about someone who might fit your target client profile, or if your client says, “You know, you really ought to talk to…,” a very simple way to learn more about that person is to say, “Really, tell me about him [or her].” And then let your client talk. Depending on what you hear, you can follow up then or at a later time by saying something like, “Do you think he/she might be concerned about [specific need or concern that you can help with]?”

  1. Determine your follow-up process. You should have a follow-up process in place both for the person being referred as well as the person making the referral. Of course, the best referrals are those where the referrer actually introduces you to the person being referred. A simple but effective way to open that discussion with your client who is giving you the referral is to ask, “What do you think might be the best way for us to get together?” You are giving your client the opportunity to take the lead (and some ownership) in the connecting process. And your client may also be able to give you a little more insight into the situation of the person being referred as it relates to the timing of the introduction, where and how it takes place, etc.

Over time, as you continue the process of getting to know the person being referred, you will want to periodically update your client or the person who made the referral. No matter what the eventual outcome, your follow-up process should include a written note of thanks for the opportunity to be introduced to someone whom you may be able to help. Phrasing your note of thanks in this way will keep the client-centered focus of your entire referral process.

  1. Measure your progress. As with any process you introduce into your practice, setting goals for yourself and then tracking your progress, both in terms of activities (developing or implementing various processes to promote more referrals) and results (new clients who were referred into your practice) are beneficial in keeping your focus as well as measuring your success.

If you would like further help in developing a successful referral process for your practice, see the articles and templates in the New Business Development section of the Structured Practice website, or contact Susan Kornegay, Managing Director of Practice Consulting at or 646-285-8362.

LWI Financial Inc. (“Loring Ward”)

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