February saw stocks slide lower after posting solid gains to begin the year. Each of the benchmark indexes listed here retreated from their January totals, with the Dow falling the furthest, followed by the Global Dow, the S&P 500, the Russell 2000, and the Nasdaq. Investors saw hope in January that inflation may be waning. However, February data showed inflationary pressures reversed course and expanded. The Federal Reserve has consistently maintained that it seeks to achieve maximum employment and hold inflation at the rate of 2.0%. So far in 2023, job growth has been solid, with more than 500,000 new hires, while the Consumer Price Index (+0.5%) and the Personal Consumption Expenditures Price Index (+0.6%) revealed increasing inflationary pressures over the previous month. Inflation has risen 5.4% since January 2022, according to the latest PCE price index. With evidence that the economy can withstand further tightening, the Federal Reserve is likely to continue to drive interest rates higher and for a longer period of time. This, coupled with lagging corporate earnings and the Russia/Ukraine war, which is entering its second year, has caused some investors to move from risk.

Industry data tells us that the vast majority of new clients come from client or COI referrals. A 2022 Cerulli Advisor Metrics report¹ showed the highest percent of new clients were acquired through client referrals (53.2%). COIs were ranked second with 14.3% of new clients coming from professional referrals. However, as a 2020 Kitces study demonstrated, when it comes to the quality of the prospects, COI referrals win.  The study showed that COI marketing campaigns produced the highest average revenue per client than any other marketing activity.

High net worth individuals are already working with a network of professionals and rely on them to make good recommendations. However, advisors have indicated that they are struggling to reignite their referral sources post covid.

A solution?  Implement a consistent and systematic relationship management process with Centers of Influence, similar to the one you may be using with clients.  The process should actively reinforce your value proposition to help keep you top of mind when it comes to referrals.

The process should be similar to finding prospective clients and turning them into actual clients, and finally into raving fans through your client experience.

The steps below can help build an effective relationship management process:

Step One: Determine who your sources are.
Consider local professionals or professionals in your clients’ vicinity and ask your clients who it is they work with. Don’t forget to think outside of the box! Not only are Certified Public Accountants (CPAs) and estate attorneys beneficial to work with, but consider the concerns or hobbies of your clients and find professionals who can help. For example, travel experts, gold pros, personal trainers, baby sleep coaches, and assisted living facility directors.

Concern: Retirees consistently cite healthcare costs as one of their primary financial concerns2
Solution: Host a webinar with a Medicare specialist for clients, family, friends and COIs. Use financial planning to help ease clients’ minds.

Step Two: Reach Out
Invite your COIs to an informal cup of coffee and, without using names, reference any mutual clients in the invite. Get to know them like you would a prospective client and inquire about their business, family, sports teams etc.

Step Three: Follow-up
Send an email and ask if they’re interested in meeting other professionals in the area. Host an informal round table over coffee and bagels with a promise of getting them to their desks by 9 AM. Suggest a regular cadence to your meetings and bring in other experts regularly.

Step Four: Share Your Resources
Invite your COIs to walk through the office or take them through a mock Zoom review meeting so they can see what their clients will experience. Be sure to include in your conversations who you do your best work for, such as those who are selling a business or concerned over their retirement plans.

Step Five: Develop the Relationship
Create a communication calendar to expand these relationships. Invite your COIs to client events and include them on your newsletter mailing list. Stay top of mind with consistent communications, relationship-building calls and meetings with focus on providing value to them and their clients, not on asking for referrals. Send care packages or buy lunch for the office during their busy periods. The stronger the relationship, the more likely you can be to receive referrals.

Step Six: Make it Easy
Make it easy for your COIs to refer you. Offer special office hours to their clients with a unique online scheduling link for the CPA or attorney to use for their clients.

Post referral process
A COI campaign does not instantly develop a consistent source of referrals. However, once it does, be sure to have a process in place to encourage future referrals. Reach out immediately following a referral. If appropriate, discuss the prospect’s situation so you can prepare for your first meeting. Follow this with a thank you note, particularly a handwritten one. Staying within compliance and confidentiality guidelines, let the professional know the outcome. Consider implementing an annual review an existing COI to review the work you do together for mutual clients and the structure of your professional relationship.

Finally, make sure you are tracking the sources of your referrals in your CRM. Consider hosting a COI appreciation event for those super referrers.

For more ideas and resources for growing and scaling your advisory business, contact your wholesaler today!
Sources:
¹Cerulli U.S Advisor Metrics 2022 *https://www.kitces.com/blog/client-acquisition-cost-financial-advisor-marketing-efficiency-lifetime-client-value-lead-generation-satisfaction/
²The Cerulli Edge –  U.S. Asset and Wealth Management Edition • January 2022

Beacon is excited to now offer a new version of our monthly fact sheets that indicates live performance. Visit our advisor toolbox to review and don’t forget to take advantage of the additional resources available there. Keep checking back as we continue to add more materials to help make an impact on your practice.
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