Five Ways to Cultivate Professional Referral Relationships

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Kristen Luke

I recently polled advisors and asked, “What has been the most effective form of marketing for you?”  As I expected, the most popular answer in my admittedly unscientific research was “Center of Influence Referrals”.  That’s also what I hear directly from my clients. 

Others who have spent a lot more money researching this question found the same answer - professional referrals are an effective way to grow assets.  Schwab Institutional recently published a white paper titled Best-Managed Firms: The Business of Serving Clients, which showed that the best-managed firms garner the majority of new assets from professional referrals, as depicted in the table below.  In the study, assets gathered from professional referrals resulted in 7.5% asset growth.  Even firms not categorized as “best-in-class” still had 4.2% asset growth from professional referrals. 

Clearly, developing relationships with professionals considered to be centers of influence (COI) must be central in any marketing plan.

Average Annual Asset Growth (Excluding Market Performance)

Asset growth by source: Best Managed Firms Other Firms
Existing clients 3.1% 0.8%
Client referrals 7.3% 5.9%
Professional referrals 7.5% 4.2%
All other sources 2.7% 1.5%

Total 20.6% 10.8%

Source: BEST-MANAGED FIRMS: THE BUSINESS OF SERVING CLIENTS, Productivity in a high-touch business, Schwab Institutional, page 41, 2009.

Once you have identified the COI relationships that you would like to cultivate, do you have a plan in place to ensure you are nurturing those relationships?  If you are only interested in having a couple of professional referral relationships, this may not be necessary.  However, if you are looking to make professional referrals a key strategy for your business, you will want to develop dozens of relationships.  COI relationships can sometimes take years to develop.  To efficiently nurture these relationships you will need an action plan to touch your COIs throughout the year, just as you would your clients.