4 Ways to Boost Your Firm's Client Referrals
What You Need to Know
What sets the best firms apart from those with subpar growth is that they aren’t looking at their data as a snapshot in time.
Make every advisor in the firm aware of disappointing client-referral trendlines.
Lean into your firm’s referral-heavy months by increasing the amount of relevant, helpful content you deliver to clients.
As leaders of financial advisory firms look for ways to boost their firms’ organic growth, many of them turn to data as a starting point. This is a wise move, since data can serve as a powerful growth tool. But there’s one big caveat: Firms should use their own data as a guide, not industry benchmarking studies.
While it’s tempting to rely on a broader set of data, a narrower dataset is more powerful when it comes to organic growth. One of the principal reasons growth-minded firms should limit their use of industrywide benchmarking studies is that this research tends to lack data from many of the fastest-growing firms in the business.
From my own knowledge of the industry, I can unequivocally state: Firms that have unlocked the winning formula for strong organic growth aren’t participating in these studies — and with good reason.
An advisory firm’s data is one of its most valuable organic growth tools. Protecting that information and using it for the firm’s exclusive benefit give it a serious competitive advantage.
So, if the best firms out there aren’t participating in benchmarking studies, it’s likely that the top firms in the benchmarking studies are only the top ones in this specific research. This begs the question, what are the top firms across the industry actually doing to boost organic growth?
1. Look at Your Data in a Better Way
Very early in my career, I learned how the best firms look at their data. First, they rarely ever share their data. If they do, such as with their consultant, they have it locked up under strict confidentiality agreements.
Second, these growth-oriented firms don’t focus on the exact number of leads, the exact number of clients who were retained or the exact number of client referrals being received. What’s most important to them is their trendlines.
Is the trendline increasing, decreasing or staying flat? The best firms aren’t looking at their data as a snapshot in time; they’re looking at where their data trendline is heading. Unfortunately, most industry studies are backward-looking and focus on what’s happened over the past year or earlier, rather than looking forward.
For example, the client referral rate is the number-one revenue indicator for organic growth at advisory firms. When you look at client referral trajectories, you’re going to see either growth, decline or stagnation. Depending on the trends, different options are available to improve growth.
2. Review What Can Help You Improve the Referral Trendline
What should you do if your firm’s client referrals are flat or trending down, and you want to quickly get referrals trending up? The best solution (based on our two decades of experience) is to make every advisor in the firm aware of the disappointing client-referral trendline.
This will help each individual advisor (or advisory team) understand that while certain advisors may be getting a lot of client referrals, the business overall has been getting too few client referrals.
Making all the firm’s advisors aware of this trend will prompt them, consciously or unconsciously, to move the trendline. We have seen this happen time and again in large and small firms, because advisors want their firms to succeed.
Those firms that aren’t watching their trendlines often seek to boost client referrals by changing their advisor compensation program. Financial sweeteners, they hope, will incentivize advisors to ask for more referrals or go out and drum up more.
Compensation changes (I assure you) aren’t necessary. Our experience has shown that simply making people aware of the trend and encouraging them to help is sufficient to start moving trendlines up.
