Neil De Beger
In the five years since the Royal Commission, the number of financial advisers in Australia has nearly halved, with approximately 15,500 advisers currently active.
While this decline may appear alarming to those outside the profession, many insiders believe that the industry is now in a stronger position than ever before.
We are entering a new era of advice characterised by innovative thinking, fresh perspectives, and advisers who prioritise soft skills, such as empathy and understanding their clients’ mindsets and behaviours, alongside technical expertise in financial advice.
In this article, we explore the enduring importance of trust between advisers and their clients and how to significantly enhance your chances of business growth.
Advocates yield significant benefits
The Pareto Principle, commonly known as the 80/20 rule, illustrates that 80% of outcomes stem from 20% of causes.
This principle applies to various aspects of life, including advice businesses who are aware, that it is generally their top % of clients that generate 80% of their firm’s revenue.
Once you acquire a new client, it is widely acknowledged that developing a successful strategy to nurture that client relationship, yields significant benefits, namely:
- Cost-effectiveness: Retaining existing clients is approximately five times more cost-effective than acquiring new ones. The cost of a customer acquisition (CAC), including distribution, marketing, and all other costs, more often surpass those associated with ongoing customer lifetime value (CLV), retention and service of existing clients.
- Increased growth: Loyal customers are more receptive to your other recommendations and efforts due to the trust and satisfaction inherent in their relationship with you. Research indicates a higher success rate in promoting services to existing customers (60-70%) when compared to new ones (5-20%).
- Referral potential: Satisfied and loyal clients often become ambassadors for a business, recommending its services and solutions, to others. Word-of-mouth recommendations hold far more influence, with most people more likely to purchase a product or service, based on a friend’s trusted recommendation. Nielsen research found 92% of people are more likely to buy a product or service, if their friends or a family member, recommend it.
Identifying and tapping into the gold seam
It is widely accepted that referrals are the lifeblood of many advice firms and a strategic documented approach is required, for both inbound and outbound referrals.
Referrals are so well-regarded because of the trust that is attached to them. Research by the University of Lancaster in the UK found that 33 per cent learnt about their financial adviser from a family member, employer, or a professional such as their accountant.
With smaller firms who have limited resources, as well as perhaps a lack of an appetite for what they deem to be ‘expensive’ marketing or promotional activities, it’s not uncommon to shy away from investing in marketing. It also comes down the perception, that Marketing is both expensive and too hard. Yet it needn’t be.
An essential part of any business strategy, Marketing helps to acquire, nurture, retain and evolve clients into advocates for your business. And when it comes to obtaining quality referrals, there are proven Marketing strategies that can certainly help.
The following section provides a few practical and cost-effective tips, to get you started on your client referral program (or improve your current activity to get quality referrals through the door)—some of this you may already be doing, some you might not.
1. Identify your advocates
a. Create a clear profile
To get started, you first need to decide who your advocates are. Not all clients will refer you and a simple profiling of your client database is a good place to start.
It is likely that you have a pretty good idea of who these might be, so this needn’t be exhaustive (e.g., you’ll most likely find that your advocates, are your mid to longer-term clients where there is already a healthy/more established relationship in place) so defining and applying your own criteria such as tenure, might serve as an easy starting point and you can then add further characteristics unique to your group or practice.
You might start with tenure then add your own variables (e.g., has been a client for at least 5 years and holds 1 or more Risk products, and at least one other product under your advice). The key here, is your starting point.
2. Validate them
a. Net Promotor Score (NPS)
NPS offers a simple and effective way to measure customer loyalty, provided via a simple score and based upon the likelihood or the customer’s propensity, to recommend your business.
Once identified, sending a simple NPS survey question to your advocates, will validate that you have the right clients so you can start your program.
Tools such as SurveyMonkey provide an easy and cost-effective way to do this.
3. Communicate with them
a. Content and cost-effective digital channels
Research shows that 83% of customers who feel appreciated, spend more with a brand, and 87% go on to advocate for it.
You will find common ground and consistent themes within your identified advocates and a great way to build advocacy, is to provide them with regular, engaging content.
You might already be sending ad-hoc communications, providing a select group with useful information. So, rather than sending one-off emails, covering multiple topics and content where you must start from scratch each time, consider putting a bi-monthly email or newsletter together and using an email platform such as Mailchimp or ActiveCampaign to manage and distribute it.
Make sure that you include a dedicated section explaining your referral program and provide a link to an online form (on your firm’s website), making it easy for your clients to refer their friends and family.
b. Your business website
Including a new page or a dedicated area for client referrals, is a good way to make sure that your clients can easily refer others through your website.
Better still, if your clients have a log-in to a dedicated portal, you could a section within there, that provides simple information outlining your referral program and how you can help their potential friends or family members, with easy instructions.
c. Leveraging social media
Social media provides a great way to create awareness of your advice services in a cost-effective manner, so setting up social media channel/s (e.g., a Facebook page) and inviting all clients (especially your advocates) to ‘follow’ your page, is another great way to build engagement and advocacy.
If your clients start promoting you on social media, you will quickly see who starts engaging with and/or recommending you, to their friends and family. This might give you another group to target, that sit outside of your typical advocate profile and another group of clients to communicate with.
Applying some of these simple tips and methods and focusing your efforts upon these identified clients, rather than chasing down new ones, should very quickly help you to get more value and efficiency, from your activity.
Your strongest client relationships will have been built on trust and your service and lay the foundation for successful (and stronger) referrals, so it makes sense to tap into them.
Measurement is crucial
In any business, large or small, new to market or mature, marketing is a highly valuable function. It complements your activities and helps to create awareness, drive profit and business growth, acquire new clients, and importantly retain them, strengthening their engagement with you over time.
With 92% of people more likely to purchase based on a friend’s recommendation, nurturing client relationships and identified advocates, for successful referrals can gives you a crucial competitive edge.
When it comes to any referral program designed specifically for advocates, measurement is critical, and you should make sure that you’re able to track client engagement and any referrals. You need to not only measure how many referrals come in but how they convert.
Applying a continuous ‘test and learn’ methodology is important too. Once you have the measures in place, you will soon gain a clear picture of what and which of your channels are working best and you can identify any necessary areas for improvement.
Leveraging technology for scalability
As your business grows as well as your pool of advocates expands, further profiling and segmentation of your target audiences and activity, might also be necessary so that you remain relevant and keep all your clients as engaged and as ‘happy’ as possible.
For practices with a large client base (or potentially, dealer groups, looking after certain aspects of marketing communications across several firms), personalised outreach for every customer may not be feasible.
The acceptance and integration of technology, particularly in the wake of Covid-19, has streamlined communication processes, while also enhancing client engagement. Leveraging tools such as AI-powered email platforms, enables more personalised communication, at scale.
Employing the services of a marketing expert to help with the fundamentals of any existing or new communication program to the next level. A professional marketing expert will design a strategy that complements your existing service levels freeing up time for you / your practice to focus on strategic client interactions and other important areas of the business.
Conclusion
In a post-Royal Commission era, client / adviser relationships remain a priority, with advisers embracing a more empathetic and innovative approach to advice.
As part of solid marketing strategy and road-map of activity, Word of Mouth client referrals provide a proven rich seam of gold that can be an invaluable source of new business, giving advice practices a competitive edge.
Fostering strong client relationships is essential for long-term success, so identifying and nurturing ‘advocates’ within an advice practice’s client base, therefore presents significant opportunities.
This article has presented some simple and cost-effective steps that advice practices can implement, to kick-start their client referrals with these identified advocates and to gain invaluable efficiencies alongside existing activities. If correctly implemented, they can then be scaled to support business sustainability and growth.
Leveraging marketing technology, is an effective way of streamlining advocacy efforts and facilitating higher existing client engagement.
For advisers seeking guidance in developing and scaling advocacy programs, marketing experts can add strength to your business.
Importantly, they can offer services that create efficiencies, measure what is working, identify what engages your clients the most, what keeps them loyal to you and your business and what turns them into advocates, increasing your success of generating quality referrals.
By prioritising client relationships and leveraging advocacy, advisers can continue to navigate the evolving landscape of financial advice with confidence and increased optimism.
By Neil De Beger, founder and principal.
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