Myth or Reality? Quiz

Through research, Raymond James discovered that many advisors neglect to ask clients for a referral due to misperceptions about the tactic. As it turns out, clients give referrals for a wide variety of reasons, some of which may surprise you. Take our True or False quiz to test your client referral acumen.

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Highly satisfied clients will provide referrals.

The correct answer is False … according to a study by Advisor Impact, client satisfaction alone does not lead to a referral:

  • 77% of clients give their financial advisors an 8 or higher out of 10, and

  • 83% of clients are comfortable providing a referral, yet

  • Only 29% have provided a referral within the past 12 months.

These statistics suggest that while most clients are quite satisfied with their financial advisor, only 29% have provided a referral within the past 12 months.

2 of 7

Investment performance is highly correlated to receiving referrals.

The correct answer is False … consider these statistics by J.D. Power:

  • 77% rank the performance of their portfolio as 6/10 or higher and account for 78% of people who “definitely will” or “probably will” recommend their investment advisor.

  • 23% of clients rank the performance of their portfolio as 5/10 or lower and account for 58% of people who “will probably not” or “definitely will not” recommend their investment advisor.

This means that 42% (100%-58%) of people with “good” portfolio performance would still not recommend their financial advisor.

3 of 7

Picking up the phone on the first ring and other high-touch service features influence referrals.

The correct answer is True … our research found that trustworthiness is correlated to financial advisor accessibility and communication when markets are both up and down. When you provide this level of service, clients are more willing to refer you to others.

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Asking for referrals is the only way you'll get them.

The correct answer is True … While many financial advisors receive referrals by focusing on providing a very high level of service and taking advantage of indirect networking opportunities, plenty of others find that the easiest and most effective way to receive a referral is simply to ask for it.

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Low-net-worth clients are just as likely to refer you as high-net-worth clients.

The correct answer is True … you should consider all clients equal with regard to referrals. A low-net-worth client is just as likely to refer you as a high-net-worth client.

6 of 7

You have to actively network to receive referrals.

The correct answer is True … according to our 2012 Advisor Referrals Survey, 26% of financial advisors say that networking has been an effective way to generate client referrals. However, many of the top financial advisors we spoke with had a more mature business, which made networking less critical to receiving referrals since their client base was established enough that existing clients referred friends and coworkers.

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A client is more likely to refer you upon learning a friend needs a service that you provide.

The correct answer is True … in a study by Advisor Impact, 57% of clients who provided a referral did so because “a friend described a financial challenge.” When asked what financial advisors can do to get more referrals, 58% of clients said their financial advisor can help them understand how to help their friend.

Third-Party Resources

The following resources provide additional information about why clients really provide referrals.

Turbocharge Your Referral Process
  • Watch a webinar by SEI about why clients refer their financial advisor.

Audio Summary of Julie Littlechild’s “Anatomy of a Referral”

  • Listen to an audio recording in which Julie Littlechild summarizes key survey findings and explains the implications for financial advisors.

The Client Driven Practice

  • Check out this blog for information about ways to attract more referrals.