Winning client referrals: 5 marketing tips for financial advisors

Referrals are still the backbone of organic growth for registered independent advisor (RIA) firms. Don't take our word for it—the 2024 RIA Benchmarking Study from Schwab shows that referrals from clients and centers of influence (COI) remain the leading driver of organic growth, accounting for 67% of new clients and new client assets in 2023.¹

It's not automatic that happy clients will refer friends and family to their advisor. Many clients don't even realize that you're open to referrals and others just might not know what to say.

It takes intention on your part to win referrals, but that doesn't mean you have to be aggressive. Firms that cultivate referrals can take a few different approaches. Consider your style: Are you a hunter, a farmer, or both?

Hunting versus farming

"Making clients aware you are interested in new business is different from asking directly for referrals," says Jerry Cobb, director, business management consultant for Schwab Advisor Services. "And there's some debate about whether it's okay to ask your clients directly for names or whether it's distasteful. We often refer to this as hunting versus farming."

When it comes to referrals, a hunter is someone who identifies referral potential and then goes after it. Hunters usually do this by asking clients directly for names or to make introductions. Some clients find this approach distasteful, but the clients who are receptive can bring you strong leads.

Farmers take a less direct approach. They plant seeds by cultivating relationships with clients and participating in networks where potential clients are active. Farming takes time, but it can deliver a steady stream of prospects.

Many advisors do some of both since hunting can be hit-and-miss, while farming is often slow and time intensive. Wherever you fall on the hunting-versus-farming spectrum, it's helpful to know what motivates your clients to make a referral in the first place. Understanding their motivations can help you tailor your referral strategy to what your clients want.

What motivates clients to refer?

Clients often have reasons of their own for referring their advisor to a friend or family member. Motivations typically fall in three categories:

• Altruism: They genuinely want to help someone.
• Natural connection: They want to use and expand their personal and professional networks.
• Sense of importance: They want to be a difference-maker for family and friends.

Take some time to think about what's most likely to motivate each client. Once you have a sense of what drives them, you can use these five tips to help sharpen your referral strategy.

1. Foster a referral culture

Help everyone at your firm recognize and capitalize on referrable moments. Discuss cues that your clients are happy with your work—it could be as simple as receiving a compliment—and how you want to respond. For some, this is a perfect time to ask for a referral. A less direct approach might be to ask for an online review. Even mentioning that you're always excited to help clients like them is a great way to imply that you're open to referrals.

2. Ask for and implement feedback

Learn from your clients whenever possible. Ask them what they value about working with you and how you can make the experience better. If their feedback is enthusiastically positive, consider asking them to share their experience with their network. If you have room for improvement, thank them for their insights and take action that shows you've heard their concerns.

3. Create something shareable

Post a short video with seasonal or timely advice to your social media channels. Or develop a free guide or checklist that your clients can download from your website. This is a great way to seed a referral without asking for one directly. If they share your content, that's an implicit endorsement of your firm.

4. Invite clients to an event

An exclusive invitation-only gathering, a fireside chat with your firm's leadership, or an online educational webinar—all are great ways to deepen client relationships. Fun events also create reasons for clients to invite their friends to get to know you or your firm. In fact, encouraging a client to bring a friend or co-worker to something fun can be a nice gesture that also creates an opportunity for you to walk up and introduce yourself.

5. Reciprocate

As appropriate, model the behavior you want to see. If your client is a professional whom you can authentically connect with and recommend to someone else, do so. This then makes it easy to ask them to do the same for you.

Winning your ideal client

It can be exciting to pursue new clients and grow your business, but remember that having a strategy is your best strategy. That's where knowing your ideal client comes in.

Our 2024 RIA Benchmarking Study shows that RIAs with a documented ideal client persona (ICP), client value proposition (CVP), and marketing plan attracted 67% more new clients and new client assets than firms without all three in writing.¹ Before you act on these tips, you need an ideal client persona (and if you have one, now's a good time to revisit it). Once you know who you most want to serve, you'll be ready to start moving your best clients from quiet consumers to vocal advocates.

What you can do next

• If you custody with Schwab: 
  • Enroll in our Virtual Practice Management series, Optimizing your Growth Strategy, where you can learn how to remove barriers and create a consistent approach to drive more client referrals.
• If you don't yet work with Schwab, consider a custodian that is invested in your success. Contact us to learn more about the potential benefits of a custodial relationship with Schwab.