Referrals provide the initial force behind affluent prospects meeting and ultimately hiring a financial advisor. At the Oechsli Institute, we use the term “word-of-mouth influence” to describe referrals, and we’ve been studying the concept since 2003, when our affluent research identified it as a “significant impact factor” in major purchase decisions.
Our persistence on this issue has finally borne fruit. Once we were able to compartmentalize all the actions of advisors who were the beneficiaries of word-of-mouth influence, a sequential model evolved (see below).
The Hierarchy of Word-of-Mouth-Influence
Using financial advisors as our subject, we measured word-of-mouth influence using a simple but powerful metric: the number of unsolicited referrals an advisor received in the preceding 12 months. We categorized advisors in the following groups: Generators (those with 10-plus referrals during the preceding 12 months), Middlers (those with three to nine referrals over that period), and Laggards (those with zero to two referrals).
The advisors benefiting the most were the Generators, acquiring 10 or more referrals annually and bringing in significantly more new business as a result. Here are the groups by percentage of 10-plus referrals they had in one year.
Generators: 73% 10+ new households
Middlers: 42% 10+ new households
Laggards: 17% 10+ new households
Here are the components that make up the hierarchy:
Exceed Professional Expectations: Being an outstanding professional is the baseline for word-of-mouth influence.
A financial advisor must be “first rate” in every sense of the term. This goes beyond comprehensive wealth management services and includes the quality of personalized service, the quality and frequency of in-office reviews and ongoing communication, the use of outside experts, as well as following through on all promises.
Emotionally Connect: Emotionally connecting creates a reciprocal, caring relationship.
One might assume that if a financial advisor exceeds professional expectations, the word will get around. But professionalism is expected.
According to our research on affluent investors, when advisors had a personal relationship with them, clients rated their performance more highly in every area of wealth management. They talk about them, provide unsolicited referrals, and are also more willing to personally introduce their advisor to people in their spheres of influence.
What is emotionally connecting? Essentially it’s bonding with another individual on a personal level, sharing feelings and thoughts. This requires advisors to have a sincere interest in their client’s family issues, and share personal issues regarding their own family.
Activate Conversations: Create situations in which it’s natural for clients to talk about your services.
Financial advisors who benefit most from word-of-mouth influence don’t wait for clients to stumble upon the right situation; they help create the right situation. This can take the form of an edible gift delivered to a client’s office that will be shared, a personal phone call when the client is socializing with friends, being visible where clients are socializing, and buying a round of drinks, etc.
The secret is for advisors not to depend on their emotional connection to activate conversations, but to look for ways to create the right situation in which it’s natural for clients to talk about them.
Refine the Narrative: When people recommend service providers, they like to provide context.
Rather than telling clients what to say and when to say it, the advisor needs to plant seeds of their narrative in conversation.
The idea here is to provide background that can be used when a client talks with someone else about their advisor, such as how they got into the business and so on.
This also involves helping clients articulate why they like working with their advisor. This serves to possibly prompt a person who might be listening to want to meet this advisor.
Lastly, advisors need to educate clients on their ideal client profile. It’s much easier for clients to refer their advisor when they know the type of client they work with.
This model provides a simple roadmap for advisors who are serious about benefiting from word-of-mouth influence. It requires patience and persistence, but the impact on client acquisition is powerful.
