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If your practice is like most, your best source of quality prospects comes from referrals from key clients, centers of influence (COIs) and your network.
By evolving into a “referral-only” practice, you will generate more referrals, increase your growth, and have more time to focus on key relationships.
Here are the top five reasons to convert to a referral-only practice.
1. You will be absolutely clear on the specific clients you want to attract
Many advisors find that the top 20% of their clients generate 80% of the profits.
Even as few as six new “A” clients a year, for a 100-client practices, will significantly grow the bottom line.
The way to generate quality referrals is to paint a picture of that person and the very problems you can solve to your existing clients and relationships.
Through what is known as the “Noah’s Ark” principle, new clients may bring another like them, meaning each new ideal client can yield two new ideal clients.
Practices that are referral only are crystal clear on the “A” clients they want to attract, are able to communicate the problems they solve and benefit from the “Noah’s Ark” principle.
2. You will focus on servicing the heck out of your existing clients
Happy clients tend to stay in your practice for a long time, add assets, buy other services, and refer to others like them.
Practices that go referral-only recognize the importance of existing relationships and find ways to “service the heck” out of existing clients.
White-glove service shows up financially with a higher lifetime value of the client as well as a higher lifetime referral value.
Higher lifetime value means each client is more profitable to your practice over the time that they are active customers.
Higher referral value means each client refers more clients to you.
Practices that are referral-only offer better service and thus have happier clients that are worth more in fees and profit and refer more business to you.
3. You will create a referral system, including a process to convert referrals to clients
Referral-only practices get proficient at stimulating referrals, nurturing a contact to a meeting, and converting those prospects into clients for life.
As small business process guru Michael Gerber outlined in his book, e-Myth, “The system works so you don’t have to.”
Hit-or-miss referral programs or haphazard processes do not work.
A system that predictable, measurable, and consistently followed will likely produce results.
A practice focused on a large employer in town may sponsor or host events for employees and recent alumni to make social connections with current clients and gain new introductions to new ones.
A practice that caters to entrepreneurial business owners may develop a Wealth Management 101 for Entrepreneurs workshop to stimulate new referrals and convert those referred to meet individually in your office.
Practices that are referral-only will have a proactive referral system and process for converting referrals to clients.
4. You will drive referrals not just from your clients, but COIs and your extended network
Referral-only practices generate referrals from existing clients, extended networks, COIs, and even strategic partners.
Advisors with Lifestyle Freedom, an RIA based in Sarasota, FL, have a niche of helping business owners and wealthier families with complex wealth management needs.
They generate referrals, but by far the biggest stream of new referrals and “A” clients comes from strategic CPA partners who specialize in working with those two audiences.
Referral-only practices also run educational events and market through referral partners.
For example, for Lifestyle Freedom, the CPA firms it works with sponsor an educational seminar or feature advisor articles in their newsletter and blog. Lifestyle’s social media marketing strategy is centered around content that the CPA firms can also share with their networks.
Practices that are referral only go beyond client referrals and tap into other sources of referrals: people and companies that have influence over your target market.
5. Your practice will instantly gain the “attraction-factor” of a large magnet
People want what they are not sure they can get. It is the way we are wired.
One of my first advisory clients had 70 households when it wanted 100. It had been stuck on about 70 client families for five years.
The referral coach they were using at the time said, “Tell all your clients you are shutting the door to new clients at 100; you will only take 30 more. If they are happy with your service, this should break the log jam of referrals.”
Boy, did it ever.
Within a year and minimal marketing, it added the 30 clients it desired!
Never underestimate the power of exclusivity and scarcity in your practice. “Takeaway selling” combined with a soft or hard cap on practice size can be a fuel for growth.
Referral-only practices end the frustration of begging for and pursuing referrals and become magnets for referrals.
Finally, being a referral-only practice does not mean you won’t have to follow-up with leads that are funneled your way, nor does it mean you can ignore your existing clients and contacts.
Because those leads will come at little to no monetary cost, you will have a relatively large marketing budget for things like content marketing, client events, and client education and gifts.
To stimulate more referrals and grow your practice become “referral only.”
Bob Hanson is a fractional marketer and author of Marketing Power for Financial Advisors. Get his checklist, Nine Questions Advisors Must Ask Before They Hire a Marketing Agency, Fractional or Full-Time Marketer, click here.
Read more articles by Bob Hanson
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
