Why Do So Few Clients Actually Refer?

We like to believe that the reason otherwise satisfied clients don’t refer is because they don’t like to talk about anything even vaguely related to money with the people they know.

It turns out that’s true for about 19 percent of clients who don’t refer. And that leaves almost 80% of those clients who provide a very different reason. So what’s the real issue?

According to our latest research with high net worth investors, 64 percent of clients who didn’t refer in the last year said it was because they simply hadn’t met anyone they thought needed a financial advisor. A further 18 percent said it was because they didn’t know who to refer.

And when you understand the data it becomes very clear that there are two significant referral opportunities sitting right in front of us:

  • Making sure we meet the referrals made by the nearly 50 percent of high net worth clients who said they provided a referral in the last year, and
  • Helping the nearly 80 percent of those who didn’t refer to spot a good referral opportunity.

To help us go deeper on the reasons clients don’t refer, Steve Wershing and I talked to Dan Allison on our Becoming Referable podcast.

Now it may be a form confirmation bias, but I really enjoyed speaking to Dan about this topic. The fact is that we’re singing from the same referral song sheet and my research aligns with his thinking. As a result, he is obviously correct. (At least I can admit my own bias.)

Dan is the president of the Feedback Marketing Group, a consulting firm that utilizes focus groups to help firms implement a system to duplicate their top clients. His background is in clinical and behavioral psychology, and he’s been leveraging that to understand clients’ referral behavior and how advisors can close the referral gap.

You can listen to the full podcast here and below are Dan’s top seven reasons that clients say they don’t refer.

The 7 Reasons Clients Don’t Refer

According to Dan, regardless of country or asset levels, clients share the same 7 reasons for not referring:

1. “My advisor doesn’t ask me for referrals.”

There’s a good chance you do feel you’re asking for referrals but the problem seems to be that we do it so passively, clients don’t even realize they’re being asked.

2. “I don’t know who my advisor wants to help.”

Dan gets it exactly right. “Know who you serve,” he says, “and be able to describe those people in a way that makes me think of people that fit that criterion.”

3. “I can’t explain what my advisor actually does.”

Dan suggests clients need to be educated on what you do so that they can repeat it easily and in the right circumstances when they come across someone with a need.

4. “I already provide referrals.”

Good point. Many clients do share your name, but they don’t make an introduction and the referrals are often lost.

5. “I don’t like to talk about money.”

See my point above. It’s true for a minority of clients and your job clearly isn’t to change their mind.

6. “It’s too risky.”

It’s true that referring a financial advisor carries more risk than a restaurant. That said, almost all clients say they would refer if they thought you could help a friend or family member. Their goal of helping that person tends to outweigh the risk.

7. “The client experience hasn’t been good.”

Ok. I’ve got nothing on this one. Fair point if that’s the case.

Dan shares some great tactics in the interview on how to take action once you know what’s getting in the way.

Thanks for stopping by,

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2 Responses to Why Do So Few Clients Actually Refer?

  1. Julie Smith May 18, 2018 at 3:40 pm #

    Liked the why clients don’t refer article.


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