Financial planners are failing to leverage their most valuable asset - their client base - to boost their profitability, research by Business Health has found.
Its Catscan survey of 30,000 premier clients found 86 per cent were willing to refer their financial adviser to family or friends.
However, only 58 per cent had done so.
"Why haven't they? Because clients simply haven't been asked. Yet this represents an enormous opportunity to advance the business," Business Health principal Rod Bertino said.
Planners must tell their clients they want, need and value referrals, and educate clients on the type of client they want and inform them of the referral mechanism.
"Explain to your clients how your business grows, survives and thrives. Tell them who you want referred and how you want that," Bertino said.
"Practices spend a lot of time and effort, and more importantly money, building strategic links with accountants, stockbrokers and legal firms and they're all important client acquisition strategies, but planners should also go back to existing clients - we know they're willing to refer, they just haven't been asked."
Asking clients for feedback is a useful tool to strengthen relationships.
By analysing the profitability of firms in the HealthCheck database, Business Health found practices that surveyed clients had on average a 67 per cent increase in their bottom line profit per principal (assuming a notional salary of $100,000).
This swells profitability from $126,437 for those who do not survey clients to $210,918 for those who do.
"Do you know that your best clients think about your services? Almost three-quarters of practices do not survey their clients. In our opinion, it's not that they don't want to know, they just don't know how to do it," Bertino said.
A confidential and anonymous survey conducted by an independent organisation held the key to finding out what clients thought of their adviser, he said.
Just over half of Australian advisory firms contact their best clients 10 times a year or less.
However, the research found those who contacted their best clients more than 10 times a year earned on average $73,000 more profit.
The Future Ready III report from Business Health used data from 1000 best practice firms to examine how prepared advisory firms are for the future.
A number of the practices were involved in the IFA Practice of the Year competition.
The database has representation from each of the top 100 dealer groups from all Australian states.
