Understanding How Investors Choose an Advisor – 4 Rules of Thumb for Attracting New Clients

By Amy McIIwain, President, Financial Social Media on Wednesday, February 8th, 2012

It’s a fact. Investors rely on referrals to find the financial advisor they want to work with. According to a recent survey conducted by ByAllAccounts in conjunction with PaladinRegistry.com, almost 46% of the individuals who responded say they found their current advisor through a referral from a friend, respected associate, CPA or attorney.

How Did You Find Your Current Advisor?

Yet, surprisingly, even though a sizable percentage of investors have relied on a referral, over 50% of them state that they have never provided a referral to their own advisor. There are a variety of factors behind this statistic.

As the chart illustrates, over 27% of clients simply feel uncomfortable making a referral. But over 25% of clients report that their advisor has not asked for a referral—an indicator to me that new business prospecting opportunities are being missed every day.

Why Have You Not Given Your Advisor a Referral?

Given that there is such a powerful disconnect between what advisors should be doing (ask for that referral!) and what they are doing (going silent), I thought I’d pass along four maxims that may prove useful to your client acquisition efforts:

1.) If you don’t play, you can’t win.

That old saying holds a lot of truth. To not ask for a referral is to pass up potential business that’s staring you right in the face. That’s why you need to make it a point to put the question to your clients. Pick their brains to see who among their friends, colleagues and acquaintances might benefit from your professional services.

2.) If you’re online, your referral efforts are more likely on target.

This goes hand-in-hand with asking point-blank for a referral. By making it easy for clients and prospects to refer friends on your website, you’ll go a long way toward improving your new business pipeline. With a referral option on your site, you allow clients to make a referral without the awkwardness that can sometimes accompany a referral in person or over the phone. That’s especially important when you consider the statistic above that 27% of respondents felt uncomfortable passing along a name.

Need an additional incentive to pump up your web presence? How about the fact that nearly 15% of survey respondents revealed that they found their current advisor through an internet search. That doesn’t even include all the investors who augmented their search by researching an advisor’s website.

So…needless to say, if you don’t yet have a website at all, create one as quickly as possible. It’s the first place people will look to learn more about you—make sure that essential information about your firm is easy to find.

3.) If you’ve got it, flaunt it.

In a previous blog, my colleague Jack Waymire discussed the differences between subjective investors and objective investors. Without going into the differences here, let me simply state that by including detailed, persuasive information about your firm on your site, you’ll go a long way toward “controlling the dialogue” in a new business setting—and convincing both types of investors that you’re the right choice for them.

You need to ensure that your website is rich with content that describes your experience, investment philosophy, code of ethics and types of services you provide. This is especially vital for higher-end advisors who seek to qualitatively differentiate themselves from their competitors, and offset any advantage that may be held by a less qualified advisor who wins business with a gregarious sales style.

4.) If the whole is truly greater than the sum of its parts, the holistic approach is truly best.

As you can see in Chart B, one of the major reasons clients do not provide referrals to their own advisors is because they quite literally think that their advisor has not earned the right to receive referrals. That’s a painful commentary on investor-advisor relations—at least in certain cases.

Clients Who Receive a Holistic View of Their Assets More Likely to Refer Advisors

When we dig a little deeper, we find that by a nearly 3-to-1 margin, clients who do not receive a holistic view of their investment assets are likely to maintain that their advisors have not “earned” referrals. The conclusion is clear. By providing a holistic view—in effect, monitoring, reporting and advising on all of a client’s assets, as opposed to just one portion of them—you’re likely to increase customer loyalty and satisfaction. And that, in turn, will lead to more referrals.

For more detailed information on these topics…

I invite you to read our new whitepaper:  Understand How Investors Choose an Advisor: And Improve Your Odds of Attracting New Clients

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