Blog: It Takes More Than a Referral


Referrals are commonly the most successful way for financial advisors to build their practices. Most investors (44%) will acknowledge that they found their advisor based upon the recommendation of a friend or family member. But just because a client refers their advisor to a friend or family member, it doesn’t mean that the advisor will automatically win the business. After all, wouldn’t a savvy investor seek referrals from multiple friends and family members? Wouldn’t he or she interview several financial advisors before making a decision regarding a very important and personal matter? And if so, what causes an investor to choose one particular advisor over another? Spectrem’s new research report, Preferred Sales Approach: Capturing the Wealthy Investor, answers all of these questions.

Eighty percent of investors reached out to the advisor initially, with 58% reaching out to a firm and 42% contacting the individual advisor. When asked what an advisor must do to gain the investor’s business, the most common answer is “Get me to trust them” at 55%. Forty-six percent want an advisor to demonstrate expertise in topics in which the investor lacks expertise, while 44% want the advisor to work for a firm that is well-known and has a good reputation.

Just over a third of investors are attracted to financial advisors that provide a complimentary portfolio review (36%) or a complimentary financial plan (33%). While all of these factors are important, the key question is “how do you build trust with a potential client?”

When investors were asked to rank multiple aspects they look for in an advisor, the largest percentage (7%) ranked “expertise” as the most important with “ethical” coming in at 25%. But all of the following aspects were considered important at various levels to investors:  “accountable”, “well-organized”, “follow-through”, “punctual”, “consistency”, “confident/poised”, “polite” and “appearance”.

Since expertise is clearly important to investors, Spectrem asked how important an advisor’s professional designation might be when selecting an advisor. On a scale of 0-100, with 100 being “very important” and 0 being “not at all important”, investors ranked the advisor’s professional designation at 66.48. Seventy-three percent indicated a CFP was the designation they were most likely to consider important.

Other factors that might influence an investor’s decision? Fifty-eight percent want the advisor’s website to be “personable and inviting” and 55% want the website to include “education materials”. As many of our other studies have noted, while social media may not be widely used by investors for financial matters, the fact that an advisor is able to communicate through those channels, especially for educational types of information, may be important to many investors.

It’s hard to point to one specific factor that will convince investors that “this is an advisor I can trust”. As we have found in many of our focus groups, the willingness of an advisor to listen to the investors is shows the advisor is really interested in what the investor has to say.

Generally once an advisor has met with a potential new client, the advisor will not have to wait long until the investor makes a decision. Most investors (73%) decide on whether or not they are going to use an advisor within 3 months of their first meeting.

While referrals are a great way to win new clients, it doesn’t guarantee a successful conversion. Financial advisors must be prepared to show an investor not only their level of expertise but that they care and they can be trusted.