Well, actually they are free – but you have to ask for them! I am reacting to the headline of a recent article “Satisfied Clients Don’t Make Advisor Referrals: Schwab, Texas Tech Study.” The article referenced the results of the 2010 Economics of Loyalty survey, which surveyed more than 1000 investors.
The good news is that 74% of respondents were “extremely likely” to stay with their current advisor for at least the next year, and 88% had not even “considered switching.” The seeming bad news is that only 29% of clients have referred someone to their advisor in the past year, even though 91% of them said that they are “somewhat or very comfortable providing a referral.”
Why the disconnect? The missing link is pretty simple – you have to ask for the referral – either directly or via a client appreciation event where clients are encouraged to bring someone they know. In spite of the article’s title, the results of the survey are in fact very good for advisors, as the survey shows that overall investors are happy with the service that they are receiving and willing to make the introduction.
Advisors should be encouraged that a large majority of clients are willing and/or comfortable giving referrals. Now it is the job of the advisor to “pay” for that referral. And in this case, paying means quite the opposite – it actually means asking to be “paid back” for all of the great things that they have done. The disconnect is that many advisors never take this next step. Advisors do all of the hard work, spend all of necessary time providing good client service and then they drop the ball. The study uses the phrase that engaged clients = thriving practice. The advisor has to engage the client.
There are many nice and non-threatening ways to ask for referrals. The most successful advisors incorporate these into their operating protocol on a daily basis. A satisfied is client is the ideal referral candidate – if only if you make them so.
