A Financial Advisor’s Guide on How to Develop a Referral System for Clients

February 17, 2021 by Greg

You’re on your way home from work, and when you stop for gas, you decide to go inside and pick up a candy bar. As you’re browsing the aisles, you see a new type of candy and remember that a friend told you last week she tried it and it’s fantastic. You reach past the other dozen brands sitting on the shelf to try that new candy bar and see if it’s as good as your friend says.

Whether you’re picking something as simple as a candy bar or as important as a financial advisor, referrals can make a big difference. Read on to learn about how you can build a referral system that will help you grow your financial advisor business the smart way.

Importance of Referrals

Before we dive into how to set up a referral system, let’s talk about why referrals are so important. When you approach a client cold, you have to rely only on your sales skills to get and keep their attention. They have no reason to trust what you’re telling them, and you may see a pretty low conversion rate.

But when you get a referral, you’re starting your sales process from a foundation of trust. Your prospect trusts the person who referred them to you, and that client trusts you. Having that connection in place can give prospects a reason to stick around and hear what you have to say, giving you a much better chance of converting them.

Set Up an Appreciation Program

One of the first things you should do when you’re setting up a referral program is plan on giving tokens of your appreciation. Sure, some clients may refer you to their friends and associates purely because they value your services. But you’re much more likely to see more frequent, more enthusiastic referrals if your clients have some feel valued for so.

You should gift clients who make referrals something customized and meaningful to them. It could range from a bottle of their favorite wine to a gift card to a favorite restaurant or tickets to an event they’d enjoy. By showing personalized, heartfelt appreciation, you deepen the relationship with the existing client in a way they’re sure to talk about with their friends, creating more referrals.

Check on Regulations

When you’re deciding on what your incentive program will look like, it’s important that you check on regulations. For instance, you may choose to pay a third party a flat fee for each client they send you. The Securities and Exchange Commission allows this, but you have to have a written contract with that third party.

Check with your legal department and make sure the incentive program you have planned doesn’t violate any regulations. Your state may require your referrers to be registered as investment advisors, and you may need to check credentials for any third parties you’re working with. Doing this research at the top of this process will save you time and hassle down the road.

Identify Promising Clients

Once you have your approved incentive program set up, you need to start identifying promising clients who you want to ask for referrals. It’s true that referrals could come from any source, but in general, your higher-quality referrals will come from higher-quality clients. You want to focus your referral program efforts on those clients to maximize your ROI.

Sort your clients by how much revenue they generate for you and narrow your focus to the top 20 percent. Look at each of these clients individually and assess which ones are likely to have the strongest networks of potential leads. Tailor your referral program promotions to these clients and you’ll see higher quality leads coming out of your referral program.

Set Up Rotating Rewards

Figuring out enticing referral incentives that fall in line with industry regulations can be a challenge, and once you’ve worked out a solid few, it can be easy to sit back and rest on those. But what do you do when all your best clients for referrals have already earned those rewards? Their incentive to send you new leads vanishes, and your company growth stalls out.

Instead, always have new referral incentives making their way down the pipeline. It’s a good idea to aim to add a new referral reward every three to six months. Rotating old rewards out of the lineup will also encourage your clients to move quickly on referrals when they see a reward they want to take advantage of.

Run Contests

Another great way to incentivize clients to refer friends and associates is to run contests. Unlike ongoing referral incentives, the inherent time limits of a contest can motivate clients to push their connections to sign up for your services now. Contests can also bring out the competitive side of your more Type A clients, who may want to claim the title of “winner” in addition to the prize.

Set up first-, second-, and third-place prizes for the people who make the most successful referrals in a certain time period. It’s important that you blast this contest all over your social media pages, email newsletters, and more. Not only will getting the word out improve participation, but it will also raise the stakes of being named the winner.

Utilize Social Media

Social media shouldn’t just be a part of your referral program when you run contests. It needs to be an integral piece of your overall marketing strategy for referrals and otherwise. Given that nearly 70 percent of American adults have a Facebook page, you’ll be hard-pressed to find any other platform that has such a large segment of your target clientele in one place.

Make sure you announce your new referral incentives on your social media pages each time you release them. Provide easy links for your followers to share with their friends and followers. This kind of mass marketing for your referral program can bring in more new leads with minimal effort so you can focus your time on those high-quality clients we discussed earlier.

Write a Blog

It may sound odd to say that writing a blog can help you build a referral program. But remember, referrals are built on a foundation of trust; your clients need to trust that when they give your name to their friends, they’re providing a solid recommendation. A blog can help to establish you as an expert in the field and give current clients content to forward to potentially interested connections.

Write blog posts sharing your financial expertise and top tips for making smart investment choices. You can also discuss the benefits of hiring a financial advisor and mistakes that people tend to make when they handle their own investment profiles. Add a CTA at the end of each post directing readers to contact you and your blog can become a sort of mini referral program of its own.

Work with Organizations

While some of your best referrals may come from individuals, they don’t all have to. Certain organizations and groups can also become your most valuable source of lead referrals. Make sure you’re connected with organizations both in your local area and in the financial industry across the country.

Make it a point to join your local chamber of commerce, business associations, and other professional organizations in your area. Get involved in their events, and offer to be a speaker at events. These groups can become great vehicles for you to promote your business and can give you a network of well-connected leaders in your area.

Grow Your Professional Network

On the subject of a strong network, growing your professional network is another great way to get referrals. In some cases, you may get referrals from business connections who aren’t clients of yours but who know the reputation your business has. As leaders in your community, these people are in a strong position to make recommendations to their own networks.

Attend trade shows, virtual industry events, and industry conferences, and make it a point to connect with as many new people as you can. Provide referrals for other reputable business owners in your network; it will motivate them to return the favor. And always make sure to carry a few business cards with you so you can hand them out whenever the opportunity presents itself.

Send Out Periodic Reminders

One of the most important things you can do to keep your referral program going strong is to keep it at the forefront of people’s minds. Life gets busy, and in a year as hectic as this one has been, things like referral incentive programs can slip to the bottom of the list. It’s a good idea to send out regular reminders about the benefits people can gain from your referral program.

Set Up a Good Referral System

Setting up a solid referral system can help you keep your client base consistently growing and thriving. Make sure you keep your rewards up to date, and run contests every so often to amp up excitement. Also use your professional networks and organizations as a vehicle to send new leads your way.

If you’d like to discover more tips for setting up a referral system, check out the rest of our site at Stephen Oliver’s Advisor Wealth Mastery. We can help you lead your business off its plateau and break through to the next level. Contact us today to start creating the business you deserve.

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