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Turning Clients into Centers of Influence for Financial Advisors: 5 Strategies for Creating Raving Fans and Getting More Referrals

Date: April 26, 2023

According to the 2021 RIA Benchmarking Study from Charles Schwab, referrals accounted for about 62% to 72% of asset growth from new clients but fewer than half of advisory practices had a referral plan in place. 

While you know that delivering great service is key to increasing the odds of referrals, if you don’t have a concrete strategy in place, you’re likely not leveraging existing clients and centers of influence as well as you could be. Here are a few tips, based on what the top firms are doing and the data on what makes clients more likely to send referrals.

1. Define Your Ideal Centers of Influence

The best sources of repeat referrals are professionals with their own clients who trust and value their professional expertise: lawyers, CPAs, tax preparers, etc. You can tap your existing client pool for clients who may work in a role where they regularly advise clients. 

However, don’t discount the importance of personal referrals. Clients who don’t work in any kind of professional advisory capacity are still potential centers of influence because of their personal network. In fact, of that asset growth from new clients driven by referrals reported in the Schwab study, the overwhelming majority came from personal referrals by existing clients. 

When identifying clients to encourage personal referrals from, focus on those who most closely match your ideal client profile. If you’re trying to grow your pool of high net worth clients, a strategy that encourages your existing high net worth clients to send referrals will let you tap into their social circle.

2. Define What You Want Your COI to Do

Among professionals, a COI might be someone you make a mutual business arrangement with to send clients each other’s way. When an attorney finishes guiding clients through the probate process, they might recommend that client go to you for wealth management planning and advice. In turn, when you provide estate planning services to a client, you might recommend that attorney to create the legally-binding will based on that estate plan. 

Among clients, however, the COI relationship might be more informal. They’re more like influencers or brand ambassadors who rave about your great service and results among friends and family. However, sometimes those friends or family might be dealing with a complex financial situation or directly ask for advisor recommendations.

3. Stay Front of Mind with Better Communication

Not only is prompt and proactive communication one of the top things clients look for in a financial advisor, it’s also a great way to strengthen those relationships so that when a friend or relative needs a financial advisor, you immediately come to that client’s mind. 

In addition to your regular communications, consider adding the following if you don’t do them already:

  • Meeting agendas sent out before a meeting so clients know what to expect and can prepare better.
  • Follow-up emails after meetings that recap the main points of the meeting.
  • Annual summaries that highlight all the advice you’ve given and the progress your client has made toward their financial goals. 
  • Regular newsletters out that position you as a thought leader.
  • Send small, personalized gifts on birthdays or milestone events.

4. Ask for Referrals (But Not Too Often)

While constantly nagging clients for referrals can end up backfiring, a well-crafted direct approach like this can do wonders if you do it right. To start, identify your most engaged and enthusiastic clients — the ones you think are already most likely to refer people to you anyway. 

Then, email them directly asking if there’s anyone they’d refer. Be sure to be direct and clear but not pushy. Do this after finishing business with a client or as a follow-up to your annual reviews — a yearly reminder is all you need to plant the seed in their head that you’re open to new clients.

5. Incentivize Referrals

Implementing a referral program that offers incentives for referrals can go a long way toward bringing in more clients. Offering perks like discounts on future services or even gift cards in exchange for a referral is an easy way to encourage clients to send referrals more often without you having to nag them about it.

However, regulators strictly limit gift-giving from financial advisors so if you’re planning to offer gifts rather than fee discounts, make sure you comply with FINRA regulations.

If you’re stuck for ideas on what to offer, you can find some FINRA-compliant gift ideas here, including:

  • Gift experiences that your client would enjoy, like a voucher for a free massage or a survival training course.
  • Gift cards, especially gift cards that show you remember personal details about your clients (like a PetSmart gift card for the client who just got a new puppy this year).
  • Personalized gifts, like a jersey from their favorite football team or a six-pack from their favorite local brewery. 
  • Donations to a charity for a cause important to your client.

Just make sure you set clear parameters around what qualifies a client’s referral to earn an incentive. If you’re mainly using this as a lead generation strategy, smaller rewards that can be earned just by sending someone your way will do best. But if you want to focus on increasing conversions, you might opt for larger rewards that you only give out for referrals that turn into clients — that way clients are careful to only send referrals they’re reasonably sure will actually become clients.

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