Building a referral network

Strong relationships are key to an enduring business. Establishing repeat business, however, shouldn’t be the only aim from your existing client base. While most financial advisers recognise the importance of referrals in growing their practice, many don’t have a program in place they are comfortable with or is effective in realising the full potential of referrals on their business.

Whether you’re more suited to asking clients directly or establishing a partnership program, referrals are an essential part of a growing business. After all, it’s much less likely, not to mention more expensive, to achieve the same success through advertising.

With that in mind, here are just a few ways you can successfully grow referrals for your practice.

Don’t be vague

‘Ask your clients’ is advice you may often hear when establishing a referral network. That’s because it’s simple advice to give. Unfortunately, it’s usually harder done and often counter-productive as referrals are a business endorsement and it’s important to recognise a client’s reluctance when their reputation is at stake on the advice you provide.

If a client avoids a conversation on referrals – that’s a hint. However if you feel your client is open to referrals, it’s best to be prepared.

Asking vaguely – ‘do you know anyone who needs financial advice?’ – risks making you look unprofessional while your clients may feel uncomfortable and pressured. Referral success is more likely if you are specific and make it as easy for your clients as possible. One way to do this is mention people by name.

While narrowing down targets to individual names has become easier with the growth of social networks such as LinkedIn, it’s not always practical. Other ways to be specific including asking if the client knows people who have recently retired, received an inheritance or even started a family.

Tip: Look at your 10 best clients. Then write down their age, occupation, fees paid, main advice area and so on. Finding common ground between these clients will help you identify your ideal client in the future.

Find out what your clients really think

While some advice on generating referrals suggest ‘wowing’ your clients, for most advisers throwing a surprise birthday party might be a bridge too far. There’s no doubt however that great service and satisfied clients will lead to more referrals.

However, what if your perception of the client relationship is different to theirs? One way to find out is a client satisfaction survey – semi-annually or annually – and there is more to be gained:

  • Demonstrating care for what your clients think of you
  • Uncovering weaknesses you might not be aware of
  • Identifying which clients would favourably respond to a referral request (inside a multiple question survey, ‘would you be prepared to refer?’ can be innocuous).

Giving not receiving

Just as you appreciate referrals, so do your clients. This means you need to be deliberate about adding value to a referral relationship. If you focus on measuring what you get exactly against what you provide, you may be disappointed. Especially when starting, be prepared to ‘give a lot’ and make sure people know you for it.

Tip: One way for your name to remain in people’s mind is to create a client newsletter and keep in mind that writing the stories doesn’t need to be time consuming. Call your local IOOF BDM to discuss how our range of newsletters and stories can do most of the hard work for you.

Equally, if you are referred don’t rush into fee-based advice. Consider a softer approach by sending them some information about your practice or a relevant area of advice first, and let them know you’ll contact them soon.

Business Referral Partners

Another important area often mentioned is a ‘Centre of Influence’. Put simply, for most referrals, that is a business whose clients could become good clients of yours, and vice versa. And for many advisers, other businesses are a more lucrative source of referrals than clients.

Accountants are an obvious source of referrals, however, remember that the more ideal (on paper) a source is, the more likely they will be in demand as a referral source.

That’s why it’s beneficial to be more specific, keeping touch in touch with alumni from your company leverages off an existing connection, or look for advice companies and accountants who are NOT a similar size to yours – that way you may pick up work which is either too big or too small for other practices.

Other potential places to source referrals include:

  • Retirement villages - Aged care advice
  • Lawyers (Wills) – Estate planning advice
  • Lawyers (Divorce) – Financial advice
  • Business brokers – Insurance
  • Mortgage brokers – Insurance
  • Educators

Tip: Making a LinkedIn connection is often an easy way to start a connection. For most accepting an invitation is easy. This provide the opportunity to follow up with a note along the lines “thank you for accepting my invitation to connect. I believe we ….”

And don’t forget to think outside the box – wedding planners could be a great source for referrals!

Of course there are many more ways to build referrals. Whichever way suits you, it’s important to make yourself known and show your appreciation – after all, it’s important to nurture your referral relationships and make the most of all your hard work.

The information contained in this newsletter is provided on behalf of the IOOF group of companies and is intended for financial adviser use only. It is given in good faith and has been prepared based on information that is believed to be accurate and reliable at the time of publication. Any examples are for illustration purposes only and are based on the continuance of present laws and our interpretation of them at the time.