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Best Practices for Generating Client Referrals

Issue 9 - September 2009

Client referrals are perhaps the most effective route to winning new business. Yet, the majority of investment professionals find that even their most enthusiastic clients do not always feel comfortable providing referrals.

How can you encourage your clients to recommend friends, family members and colleagues? Below are best practices you may consider:

Build engagement

Having a solid base of highly engaged clients is essential to generating referrals. In fact, research shows that virtually all client referrals come from individuals who are highly committed to their investment professionals.

Creating client engagement involves a multi-pronged effort:

Make the most of client-facing meetings.

High client satisfaction does not always translate into referrals. To make that happen, you need to provide a helping hand. First, target only those clients who have expressed both a high level of satisfaction with your services and a comfort in providing referrals. Second, don’t ask clients directly for referrals, since clients tend to offer referrals as a favor to friends and colleagues, not to help their investment professional. You need to focus on problem solving—helping your engaged clients understand the types of challenges you can address by articulating your value in the context of problems you can solve for specific categories of people, especially groups the client is likely to know. For example, if the client is a business owner, instead of asking for names of other business owners, discuss the success you have had helping with the sale of a company or other relevant situations of interest.

Understand the reasons for client reluctance to provide referrals

Investment professionals often assume that clients do not offer referrals because they are not comfortable. While that can be a factor in a client’s hesitation to provide referrals, there are others. For example, a recent study found that 44% of clients who were not likely to recommend an investment professional felt that way because they didn’t know whether their friends and colleagues could meet the professional’s minimum asset level1. Also, 11% said they could not be sure others would experience the same high level of service they had received.2

To address these barriers, you can:

  • Help clients understand the specific types of clients with whom you work, so that they have a better feel for whether a friend or colleague will meet your requisite asset minimum. You might describe a typical client—for example, a business owner who is five years from selling and has more than 20 employees.
  • Explain your procedure for referring potential clients who don’t meet your minimum to other investment professionals. You will reassure clients that their friend or colleague will be supported in finding the best solution, even if that means working with a different professional.

For more detailed information on generating client referrals, please request a copy of our guidebook, Creating a Client Referral Strategy: An Investment Professional’s Guide by sending an e-mail to

1 Economics of Loyalty, Advisor Impact, sponsored by Vanguard, 2008.
2 Economics of Loyalty, Advisor Impact.

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