Client growth opportunities are being missed across the financial advice sector as advisers are not asking clients for referrals, a number of industry consultancy firms have said.
Business Health partner Rod Bertino said out of 40,000 client surveys conducted by the firm, 86 per cent of clients said they would refer their adviser to family, friends and associates, however, only 59 per cent actually had referred their adviser in the past 12 months.
Bertino said while there was a great propensity for clients to refer their adviser, numerous opportunities were being missed because advisers were not asking clients to refer them, which was likely to be in part a consequence of volatile markets and bad press in recent years.
“Interestingly our research shows that clients’ willingness to refer their adviser during the global financial crisis didn’t decline, albeit the percentage of those who said they’d referred their adviser did drop to the mid to low 50s, which again was probably due to advisers not being forthcoming in asking clients for referrals,” he said.
“Going forward advisers need to be more proactive in letting clients know they want, need and value referrals, and they shouldn’t assume that clients know this already.
“Advisers need to be clear as to the type of clients they want referred to them and what the best way to go about referring them is.”
He said client acquisition was on the agenda for numerous advice firms this year and many were sitting on potential goldmines of untapped referrals from their A and B class clients.
Customer Return managing director Nathan Williams said research by his firm showed four out of every five clients were open to the idea of referring their adviser, but only one in five were actually being asked to refer them.
“I think a lot of advisers lack confidence in asking clients for referrals as they haven’t yet taken the first step in asking clients what they think about their services and I think advisers should rethink that as referrals go a long way in increasing business profits,” Williams said.
“Advisers need to understand what clients think and get educated on good referral strategies as big opportunities are being lost through advisers not asking clients to refer them.”
Encore managing director Graham Peatey said client referrals were absolutely invaluable and often came at a significantly lower cost than acquiring new business via other means.
Peaty said particularly considering the Future of Financial Advice reforms and the increased need to demonstrate value to clients, those advisers that could ‘wow’ their clients and get them to refer new business would most likely be better placed in the future.
“We’ve done a few clients surveys and in the majority of instances where a happy client had not referred their adviser, it was simply because they’d never been asked,” he said.
