Systematizing the Referral Process for Financial Advisors

Posted on 01/04/2023

By Jon Robinson, Portfolio Manager, ClearShares OCIO ETF

Well, here we are again.

It’s that time of year when many asset managers like to make predictions about the year ahead, while Blueprint Investment Partners, which sub-advises the ClearShares OCIO ETF, calls attention to the foolishness of that exercise. As evidence, I give you this January 2022 tweet from Bloomberg media personality Jonathan Ferro, who recaps how 14 leading financial firms foresaw how the S&P 500 would end 2022.

Their guesses lend credence to my assertion that one of the only annual market predictions worth making is this: Following a consistent, disciplined investing process will lead to better outcomes than trusting the predictions of financial “experts.”

I mean, how much of an “expert” can you be if your prediction for the S&P 500 in 2022 is likely to miss the mark by 20-30%? It makes you wonder if anyone over there at overly optimistic Oppenheimer even realizes that what happens in the stock market dramatically impacts everyday investors and the financial advisors who, especially in a year like 2022, are challenged to keep their clients anchored to their financial plans.

Top Financial Advisors & Referrals

A key theme we champion at Blueprint Investment Partners is efficient repeatability, as well as discipline.

Similarly, Mike’s approach to referrals – a common characteristic of most successful financial advisory practices – seeks to systematize the process. Mike argues that there is a major and crucial difference between “accidental referrals” and predictable ones, and the latter has a much higher level of success and profitability.

It’s the predictable referrals, Mike says, which are the holy grail of a successful and sustainable business. In his book, he highlights the steps advisors can take to create thoughtful, consistent, and predictable referral streams.

I’ve highlighted some of the key takeaways and action steps in the remainder of this blog.

When’s the Best Time to Plant a Tree?

How can we expect a seed planted yesterday to bear fruit tomorrow? There’s some work required in the in-between time, such as watering and weeding.

The same concept applies to referrals. The process requires careful and thoughtful planning.

Just like any other type of marketing, predictable referrals follow rules and use data. However, truly successful and sustainable referral systems are fun, easy, and intently focused on reducing the risk (perceived and actual) to all participants. In other words, a referral can be made, or requested, in the context of normal conversation and there is little to no risk of ruining an important relationship.

Just as ingredients matter for a sustainable investment plan, they are just as critical for a successful and predictable referral strategy. The planning aspect of building your strategy is crucial, as is focusing on the right segment of your network and client base. The planning, development, discipline, and ingredients are as critical to growing a successful referral stream as the watering and pruning is to the tree.

Blocking Out the Noise

From an investment perspective, Blueprint believes that market predictions are a waste of time. We think they are simply unnecessary noise when you have a predetermined and disciplined plan in place.

A similar plan can be established to streamline referrals, and it does not have to be complicated.

In fact, less is more, according to Mike. A handful of a financial advisor’s clients should become your core focus when creating a predictable referral strategy. Specifically, Mike suggests the following steps for advisors:

Focus on your most successful referrals over the last few years. Consider how they materialized. Where and how did they originate? What parts of these success stories can be replicated?
Further drill down and identify your “best” clients, who are at the intersection of enjoyable to work with and profitable to your practice.
Segment this pool into those who have referred you previously and those who have not.

By this point, you should hopefully have 5-10 potential centers of influence. Next steps are to:

Create, and most importantly customize, a consistent outreach and communication flow with this elite subset based on their needs and passions. Offer as much of the communication in person as possible. Ask yourself how else you can help these clients personally and professionally. Mike shares that in his 20 years of referral coaching he cannot recall a time where an increase in client conversations did not lead to referrals over the following months.
Be specific about what you’re looking for, what things and people you need to grow your financial advisory practice. What are the personality traits of the individuals you’d like referred to you? What field are they in? If you believe one of your 5-10 connections knows someone specific you want to meet, then be precise with your ask. Tell them why you would like to be introduced, and make it EASY for them to refer you by owning the narrative around who you would like to be introduced to and why.
Remember that people want to introduce people who are passionate about what they do. If you’ve served this subset of your client base well, they will want to tell their network and specific individuals about you.

Looking for More?

Mike has made a career out of coaching financial advisors on practice efficiency and building referral strategies. His book and corresponding website may be a good resource for you. If you have any trouble tracking down these resources, please reach out.

Additionally, feel free to reach out to us to discuss the practice management services Blueprint offers to our financial advisor partners.

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