Referrals worth their weight in gold

The road to success for advisers may be paved with small gifts and “thank you” notes.

The road to success for advisers may be paved with small gifts and “thank you” notes. Consultants recommend that advisers who are looking to build their businesses should focus on their relationships with clients and other professionals — the source of most new customers.

“The most successful advisers get 80% of their new business from referrals — about 60% from existing clients and 20% from other professionals,” said Natalie Doss, a consultant with Quantuvis Consulting Inc., a practice management firm. “Client service is sort of a marketing strategy, given how important referrals are to advisory firms.”

Building on that service foundation, advisers should have a plan for encouraging referrals from clients and other general centers of influence, consultants said. In addition, advisers’ marketing strategies should be simple and consistent. Firms also may consider external growth strategies such as acquiring other advisory firms and establishing strategic relationships that bring new clients in the door.

A monthly client-focused communication, whether it’s a regularly scheduled conference call, a newsletter, a webinar on a timely topic or something else, is essential, Ms. Doss said. Similarly, advisers should be reaching out to other professionals and meeting with them regularly.

For both clients and professionals, Ms. Doss recommends an appropriate gift or some other way to acknowledge the referrals directed your way. Even an initial note sent to a client, thanking them for the referral, should be followed up with additional letters telling them about how that relationship is progressing.

“It’s important for advisers to thank clients and professionals for referrals and keep them informed on how that new relationship is going,” said Ms. Doss, whose firm was acquired by Genworth Financial Inc. in 2008.

Marketing also plays an important role in growth, though not through traditional advertising channels. Advisers can use media coverage and topical outreach to position themselves as experts on certain topics, and engage in other branding activities.

BECOME AN EXPERT

“Some advisers had gotten kind of comfortable in the years leading up to 2008,” Ms. Doss said. “Now they realize the need for more-active marketing. We recommend putting in place a simple and sustainable plan.”

For Firstrust Financial Resources LLC, an advisory firm with $600 million in assets, a key component of its growth strategy has been its affiliation with parent Firstrust Bank. The firm was created in 2006 after its predecessor was acquired by the bank, a 76-year-old institution with 25 locations in the Philadelphia area. Since then, it has been the exclusive provider of financial services to the bank. That strategy brings the firm about a third of its business today.

“Banks provide opportunities for customers to receive financial planning and investment services, and provide the financial professional with potential clients,” said David Fleisher, president of Firstrust Financial Resources.

More recently, the advisory firm sought more-ambitious growth and switched broker-dealers. It split from Axa Advisors LLC and went with MetLife Inc.

The firm recently brought on four new financial advisers and expects to add four more.

The recent growth strategy at Rehmann Financial has involved acquisitions in new geographic markets.

The Lansing, Mich.-based firm acquired four advisory businesses in neighboring Ohio between January 2010 and January 2011, and plans a similar tactic in Florida, where many of its clients are retiring.

The advisory firm is a unit of The Rehmann Group, which began as an accounting firm in the 1940s and expanded into wealth management and corporate investigation services in 2000.

Rehmann’s three businesses don’t operate as “silos,” said Fred Schaard, president of Rehmann Financial. Rehmann’s service model integrates various departments to offer clients “a complete service package of tax, financial or investigative services,” he said. Most clients are small to midsize companies with $1 million to $400 million in revenue.

“We look for strategic growth that culturally fits us,” Mr. Schaard said. “The network has helped us grow.”

In fact, about $90 million in new assets came to the wealth management side from referrals from the other businesses during the first quarter of this year, Mr. Schaard said. Rehmann Financial has about $2.4 billion in assets.

Carlo Panaccione, co-founder of Navigation Group Inc., an advisory firm with $350 million in assets under management, said he recommends hiring good people “to do things you don’t like to do.”

Navigation Group has a group of specialists who work as a team — a chartered financial analyst to do the trading, a certified financial planner to help with the planning, to name a few.

“Clients like to know they have a group approach working for them,” Mr. Panaccione said. “So if one person is not available, they know there are others who can help them. The other professionals who refer business to us like that.”

“BUILDING A BRAND’

The firm also uses a public-relations agent to help it get exposure and build credibility.

“I used to get media calls, but I didn’t know what to really do to leverage that opportunity,” Mr. Panaccione said. He now writes an occasional newspaper column.

“A lot of what we’ve done is building a brand,” Mr. Panaccione said.

Today, all firms have to have a great website, relationships with other professionals and a management system for financial planning that gives customers access to their account information 24/7, he said.

“Beyond that, it is not so much marketing your practice but doing the best job for your clients and they market the practice,” Mr. Panaccione said.

Social media is something many firms, including his, are beginning to use for communications.

“There’s a whole generation that is going to find information differently than the generation before it, and it’s our job to conform to the client,” Mr. Panaccione said.

E-mail Liz Skinner at [email protected].