Three steps to develop an effective client referral strategy

A glowing recommendation from an existing client can carry a lot of weight. The lifetime value of a referred customer is 16% higher than a non-referred customer. According to ClientWise, the most successful financial advisers acquire over 70% of new relationships and assets through referrals from existing clients.

Not only can they offer greater value, many clients are happy to give them. According to research by Vanguard, 84% of clients are somewhat or extremely likely to continue working with their adviser. In addition, 70% of clients would be comfortable providing a referral.

People are relying on advice from close friends and family even more than usual. This means that financial advisers could acquire a range of new clients if they take the steps to create a referral strategy that works for their business.

Effective client referral strategies are not as common as you might think

Despite referrals being something to strive for, many advisers have not created a referrals process that they feel is successful.

Only 23% of clients surveyed by Vanguard had actually provided a referral. This is probably because only 5% had been directly asked by their financial adviser to recommend people who could be interested in their service.

The lack of direct requests could stem from a desire to not damage a relationship that has taken time to cultivate by appearing money driven. Many advisers are likely to understandably be risk-averse as they seek to re-invigorate their client base in an uncertain market.

However, there are a number of steps you can take to begin constructing a scalable, repetitive client referral strategy without drastically changing the way you do business.

Carry out client surveys

The last few years have been a time of reflection for many. In a similar vein, now is an ideal time for you to reflect on your business.

What are the strengths and weaknesses of your business? What is your value proposition to new and existing clients?

Your existing clients can be the best source for this kind of information. A client survey can easily be put together and distributed with online tools such as Typeform and Survey Monkey. The survey should ask existing clients to identify the strengths and weaknesses of your business. This should include specific suggestions for improvement.

This information, from those who have first-hand experience of your services, can help solidify your value proposition and potentially identify lucrative areas of diversification. This can help you to pinpoint the kind of clients you would want to be working with going forward. This will ensure your referral strategy is focused on those that can add real value.

Track the referrals you are already getting

Do you know who is providing the referrals you are currently receiving?

There is often limited visibility for advisers over whether new clients have come through direct referrals.

Many advisers rely on ‘accidental referrals’, those that were given organically. Whilst these are good to have, these client’s needs may not align well with an adviser’s skillset or previous experience. Having a more intentional referral strategy can be crucial to building a client base that works for you.

Introducing tracking sheets can be an effective way of measuring referral rates. Creating this log of where new clients come from can help you understand how people are hearing about your business.

It will also show whether existing clients are acting as champions for your service. If there are clients already giving you referrals, these can form the basis of your ‘top’ clients list. You can then develop this to maximise direct referrals.

Go directly to your top clients and build a referral appreciation process

A survey by Advisor Impact found that 28% of clients provided 100% of the referrals that financial advisers received. From looking at these statistics, the inclination may be to develop strategies that would gain referrals from the 72% of clients who were not currently giving them.

However, the vast majority of clients who gave referrals were ‘engaged’ clients that provided multiple introductions. This highlights that a focus on your ‘top’ clients could be a more effective way to build a client referral strategy.

‘Top’ clients are likely to consist of those who most closely match your ‘ideal’ client. They could also be those who have been the most active in generating business. By utilising this client segment, you can be confident knowing that these people are more likely to be pleased with your service. This in turn means they are more likely to be happy to offer a direct referral.

Working with those clients with whom you have strong pre-existing connections could also help to overcome some of the reluctance you may be feeling about asking directly for referrals.

Therefore, concentrating your client referral strategy around your ‘top’ clients can be a way to maximise its effectiveness.

In addition, showing gratitude to those who give direct referrals is critical.

Whether through a Zoom call or something more personal such as a thank-you letter, a gesture to thank referral sources as well as the new clients they have referred can go a long-way to establishing meaningful connections.

These strong relationships can form a key part of your client referral strategy. They can ultimately help to develop a steady stream of clients that match the criteria you look for most in potential clients.

How Stellar can help expand your service offering

Every client’s situation is unique. This means that when they are considering later life planning, a ‘one-size fits all’ approach is never going to work.

Whatever your clients’ needs, our Inheritance Tax Services offer not only tax efficiency. They are also specific to the clients’ specifications whilst keeping them in control of their estate.

As you develop your referral strategy, our range of Business Relief services can help you support both new and existing clients for generations to come.

If you would like to find out more about our Inheritance Tax Services, click here or contact an experienced member of the Stellar team today on 020 3195 3500.


Written by Jack Dobinson


Important Information

Stellar Asset Management Limited does not offer investment or tax advice or make recommendations regarding investments. Prospective investors should ensure that they read the brochure and fully understand the risk factors before making any investment decision. The value of investments and the income from them may fall as well as rise and is not guaranteed. No assurance or guarantee is given that any targeted returns will be achieved. Forecasts of potential future results are not a reliable indicator of actual future results.

Stellar Asset Management Limited of 20 Chapel Street, Liverpool, L3 9AG is authorised and regulated by the Financial Conduct Authority.