Client referrals have long been a cornerstone of organic new client growth because they tap into a resource every established advisor already has: an existing client base. But before getting into specific referral strategies, there is a prerequisite to receiving any referrals at all: clients need to feel that the advisor provides enough value to be worth recommending. After all, referrals require clients to spend their time and put their own reputation on the line with those in their network. Clients who aren’t highly satisfied are less likely to think of recommending their advisor in the first place—let alone trust the advisor to take good care of someone they refer.
The emphasis on clients ‘feeling’ that the advisor provides value – as opposed to simply ‘providing value’ – is deliberate. What matters for referrals isn’t just the work the advisor does, but whether clients recognize its value. That is, value must be both created and communicated. One example identified in our Kitces Research data is the use of client service calendars, which help practices demonstrate ongoing value and avoid ‘shadow work’ that advisors complete behind the scenes without clients’ knowledge. Practices using client service calendars have a 1.1-percentage-point greater referral-driven client growth rate than practices not using them, and a ‘failure rate’ (i.e., gaining no new clients via referral over the last 12 months) of less than 0.5%, compared to 9%. This suggests that helping clients see the value being delivered can also make them more comfortable referring others.
Once advisors are running the kind of practice worth referring to, many will naturally start asking their clients for referrals. But doing so can feel awkward for both parties; clients may feel ‘put on the spot’ and question whether the advisor’s motivation is genuine concern for their well-being or generating additional revenue. Interestingly, we find that asking for referrals doesn’t actually correspond with getting more of them: practices that never ask have a referral-driven client growth rate of 5.4%, declining to 3.0% for practices that ask more than once per year. Which suggests that any referrals generated by asking in the moment may be offset by clients becoming less inclined to refer in the future!
