Ask a group of advisors about the key to getting new clients, and chances are that all the answers will relate to referrals. Indeed, a cottage industry has sprung up of referral coaches promising the magic formula to help advisors frustrated that ungrateful clients aren’t providing enough of those valuable introductions.
Referrals play a big role when investors choose an advisor. After all, in a skeptical and uncertain world where investors aren’t sure who to believe, a referral transfers the trust your clients have in you to their friends and family. That’s why I was surprised last year when research from Cerulli Associates found that referrals aren’t as dominant in attracting new clients as had been believed.
In fact, among sophisticated clients, referrals aren’t even the most important determinant in deciding on an advisor.
The other “R” that drives new clients
How to win multi-million dollar clients
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The factor that’s more important than referrals: reputation. According to the Cerulli report, just 11% of affluent investors cited referrals as the key reason for selecting advisors, as opposed to 13% who made their decision based on the advisor’s reputation.
This is partly because of a big change in how investors pick advisors. Twenty years ago, when you got a referral, the odds of converting that prospect to a client were very high. Today, affluent prospects solicit multiple referrals and interview three to five advisors before deciding. While at one time, a referral won you the game, today it just allows you to compete against the other contenders – it’s what you do after the referral that counts. (Click here to see how a successful entrepreneur chose from three different advisors.)
In Cerulli’s research, 13% of investors talked about reputation as the main reason for selecting a new advisor. (Other important factors were quality of service and fees.) Reputation especially mattered among older and younger investors, with a third of investors over 80 and almost 20% of investors in their 30s pointing to an advisor’s reputation as the critical factor in their decision. The benefits of a strong reputation aren’t limited to converting prospects – the stronger your reputation within your target community, the more comfortable clients will feel introducing you to their friends.
A plan to build your reputation
Your profile in your target client community has always been important, but this research gives added urgency to managing your reputation. Today you need to treat your reputation as an essential business asset, just as you would any other critical asset in your business. Your reputation is too important to be left to chance – you need a plan to build your profile and reputation in the community that you serve.
Let’s suppose you decide to invest three hours a week to enhance your profile and reputation. You could pick one of the following five ways to spend that time:
- Take a leadership role in a charity organization
- Get articles published
- Be quoted in the media
- Write a book
- Build an online brand
Here’s how to tackle your chosen tactic.