The Hidden Risks of Relying Solely on Client Referrals

Summary

Advisor Marketing Made Simple: Episode Summary

Title: The Hidden Risks of Relying Solely on Client Referrals
Host/Authors: Taylor Schulte and Kendra Wright
Release Date: December 4, 2024

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Introduction

In this episode of Advisor Marketing Made Simple, hosts Taylor Schulte and Kendra Wright delve into a prevalent belief among financial advisors: the reliance on client referrals as the primary marketing strategy. They explore the potential risks of depending entirely on referrals and discuss why diversifying marketing approaches is crucial in the evolving landscape of financial advisory services.

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The Current Reliance on Referrals

Kendra initiates the conversation by highlighting that many advisors believe they don't need to actively market their firms because they receive sufficient referrals. However, she shares her changed perspective based on two main factors:

1. Personal Business Risks: Her own agency previously depended solely on referrals but faced significant challenges during a personal life transition, revealing the vulnerability of a referral-only model.
2. Evolving Client Acquisition Trends: Recent data indicates a shift in how clients find and hire financial advisors, emphasizing the diminishing role of referrals among younger generations.

Kendra’s Insight (00:00):
"Expanding your strategy does not mean you need to do a ton of marketing. In fact, if you listen to our show, you'll know that we often recommend the opposite. A clear, focused marketing strategy with one well-built funnel can be enough really to grow your firm."

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Taylor’s Perspective on Referrals

Taylor acknowledges the effectiveness of referrals, citing the 2022 Kitsis Marketing Study, which found that referrals were both the most efficient and effective marketing strategy, with an average revenue of over $15,000 per referred client. Despite this, Taylor expresses reservations about referrals:

1. Lack of Initial Knowledge: Referred clients often come with limited understanding of the advisor’s services, requiring more time for education and trust-building.
2. Integration with Current Marketing Strategies: Their existing funnels are better suited for education-based content channels like podcasts and newsletters, making traditional referrals less compatible.

Taylor’s Insight (01:30):
"If I was going to rely purely on traditional referral marketing to grow my practice, I would spend a lot of time building out a referral funnel and a really detailed process to ensure that the strategy is successful and does create a good experience for everybody involved."

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Shifting Client Acquisition Trends

Kendra brings in recent data from a 2024 FICOM study, revealing a generational shift in advisor selection criteria:

• 60+ Age Group: 60% rely exclusively on referrals.
• Near Retirement (Next 5 Years): 29% require referrals.
• Under 44: Only 17% consider referrals necessary.

This "referral cliff" suggests that younger clients prioritize digital marketing efforts over traditional referrals, urging advisors to adapt their marketing strategies accordingly.

Kendra’s Insight (04:04):
"The report really claims that there's a referral cliff coming. The current generation of retirees is the last one to view referrals as necessary in their selection of hiring an advisor."

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Evolving the Referral Process

Taylor and Kendra discuss how marketing practices must evolve to stay effective:

1. Adaptation of Cold Calling: Traditional methods like cold calling with stock tips are obsolete. Modern approaches focus on building trust through educational content and middle-of-funnel activities like webinars.
2. Enhanced Referral Marketing: Referrals must now be part of a structured process that includes clear communication, training for referrers, and a defined funnel to handle incoming referrals effectively.

Taylor’s Insight (05:51):
"Referral marketing is just evolving. It might just mean that you have to step up your game and give them a better reason to refer their friend and loved ones."

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The Risks of Sole Reliance on Referrals

Kendra shares a personal experience where her agency's total dependence on referrals led to instability during a personal life change. This underscored the lack of control over lead flow and client quality inherent in a referral-only model.

Kendra’s Story (12:57):
"I found that I have zero control over not only where my next client came from, but the quality of my next client."

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Strategies for Effective Referral Marketing

The hosts emphasize the importance of having a predictable and repeatable referral process:

1. Define Ideal Clients: Clearly articulate who the firm wants to serve to guide referrers in referring the right prospects.
2. Build COI Relationships: Centers of Influence (COIs) such as CPAs and estate attorneys can provide high-quality referrals if relationships are systematically managed.
3. Implement Structured Processes: From initial contact to client onboarding, every step should be streamlined to ensure consistency and quality.

Taylor’s Insight (15:33):
"Just like referrals come in sometimes and sometimes they don't, and sometimes they're good referrals and sometimes they're not. If I'm not clear about who I work with... then I would say that my clients are probably attempting to choose me as well."

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Balancing Referrals with Other Marketing Channels

Kendra introduces the idea of diversifying marketing efforts to include both client and COI referrals, thereby mitigating the risks associated with relying solely on one source. She also highlights the additional benefits of a diversified strategy, such as attracting high-quality talent and maintaining business stability.

Kendra’s Insight (18:18):
"Referrals with current clients and referrals from COIs are different. And we have a different approach when it comes to referral marketing."

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Conclusions and Action Steps

Taylor and Kendra agree that while referrals can be a cornerstone of marketing, they should not be the only strategy employed. Advisors are encouraged to:

1. Develop a Detailed Referral Process: Clearly define how referrals are solicited, handled, and followed up.
2. Diversify Marketing Strategies: Incorporate other channels such as digital marketing to attract a broader client base.
3. Invest in COI Relationships: Systematically engage with COIs to ensure a steady flow of high-quality referrals.
4. Monitor and Adapt: Continuously measure the effectiveness of referral strategies and adapt based on emerging trends and data.

Kendra’s Final Thoughts (30:38):
"If you dial in a thoughtful, intentional strategy that is also tied to KPIs and being measured and being thoughtful and proactive, then I can agree that that can be a less risky approach to growing your firm."

Taylor’s Final Advice (30:38):
"You have to have a predictable approach to market, this predictable path for growth where if you know that you're doing these things on a consistent basis, you have the process in place, you know, more or less how many people are going to reach out to you and how many people are going to hire you every single year."

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Key Takeaways

• Avoid Over-Reliance on Referrals: Sole dependence on referrals can lead to instability and lack of control over client quality.
• Understand Generational Shifts: Younger clients prioritize digital interactions over traditional referrals.
• Implement Structured Processes: A well-defined referral process ensures consistency and quality.
• Diversify Marketing Efforts: Combine referrals with other marketing strategies to create a robust client acquisition framework.
• Engage with COIs: Building and maintaining relationships with Centers of Influence can enhance referral quality and volume.
• Prioritize Predictability: Establish predictable and measurable marketing strategies to ensure sustainable growth.

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Notable Quotes

• Kendra (00:00): "Expanding your strategy does not mean you need to do a ton of marketing. In fact, if you listen to our show, you'll know that we often recommend the opposite."
• Taylor (01:30): "Referrals being the most efficient as measured by marketing efficiency and the most effective as measured by, by the average revenue derived from each client referral."
• Kendra (04:04): "There’s a referral cliff coming, and the way that people find advisors is changing."
• Taylor (05:51): "Referral marketing is just evolving. It might just mean that you have to step up your game and give them a better reason to refer."
• Kendra (12:57): "Hope is not a marketing strategy."
• Taylor (15:33): "We want to get closer to knowing if I do these five things every single week, then I'm going to get a steady stream of high quality referrals and in turn my practice is going to grow."
• Taylor (30:38): "You have to have a predictable approach to market, this predictable path for growth."

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Final Thoughts

This episode serves as a critical reminder for financial advisors to not become complacent with referral-based growth. By recognizing the inherent risks and adapting to changing client acquisition trends, advisors can ensure sustained and controlled growth. Implementing structured referral processes, engaging with COIs, and diversifying marketing strategies are essential steps toward building a resilient and thriving advisory practice.

For more insights and resources discussed in this episode, listeners are encouraged to check the show notes and subscribe to Advisor Marketing Made Simple for future episodes.

Transcript

[Kendra]

Hey, it's Kendra and Taylor and we're here to make advisor marketing simple. Welcome back to the show. Today we're tackling a belief that many advisors hold on to, which is I don't need to market my firm. I have enough referrals. Now. On the surface it makes a lot of sense, but over time, my perspective on relying 100% on referrals has changed. It'll be really interesting to see my perspective and Taylor's today as we talk about the risk of relying only on referrals. And for me personally, it's really changed for two big reasons. The first one is the risks I saw develop in my own business, which was a hundred percent referral only for many years, which we're going to talk about that. But also the second thing is the data that we're seeing emerge on how people find and hire advisors online. Now, for you advisors that are listening, I can feel some of you tensing up right now, especially if you've been enjoying a referral only growth path. And I want you to know that expanding your strategy does not mean you need to do a ton of marketing. In fact, if you listen to our show, you'll know that we often recommend the opposite. A clear, focused marketing strategy with one well built funnel that, that can be enough really to grow your firm. So today we're going to touch on some really important points and a few risks. I think advisors don't think about if their organic growth is really just coasting using referrals. But before we jump into some of those reasons, Taylor, I'd love to hear like, what's your take on referrals?

[Taylor]

Yeah, that's a great topic and I'm glad you, you brought it to the table today. I've been talking more and more about referral marketing. It's, it's probably one of the most frequent questions I get from advisors about marketing strategies, like what do you think about referrals? In fact, yesterday marketing office hours in the agc, one of the advisors said like, hey, I love the the marketing funnel episode you guys did like, how does that apply to COI referrals? And we kind of workshop how referrals fit into the marketing funnel. So I love this topic now, personally, I hate referrals. But it's not because I don't believe referral marketing is effective. In fact, according to the last Kitsis marketing study from 2022, referrals were shown to not only be the most efficient marketing strategy, but also the most effective, with the average referral being over $15,000 per client referred. So referrals being the most efficient as measured by marketing efficiency and the most effective as measured by, by the average revenue derived from each client referral. So for me, I hate referrals. I. I've just found over the years, referrals come to us with very little knowledge about who we are, what we do, how we can help, you know, our philosophy, our approach, et cetera. And therefore we found that they just require a lot more upfront education and trust building than prospects that reach out to us through our, what I would call education based content channels, my retirement podcast, my email newsletter. So if I was going to rely purely on, you know, let's call it traditional referral marketing to grow my practice, I would spend a lot of time building out a referral funnel and a really detailed process to ensure that the strategy is successful and does create a good experience for everybody involved. But for now, given our current marketing strategy and the funnels that are in place, referrals just don't really fit into our current strategy. And so my ask to clients and COIs, and I'm getting better about creating a good process for this, but my ask to them is to refer people in their life who might need help or they're interested in learning about retirement planning to refer them to my podcast or my newsletter versus referring them to my firm. So go check out Taylor's awesome retirement podcast to hear more about how he helps people or the types of things that he helps people with, and then you determine for yourself if you want to reach out to him. So while I don't love referral marketing, I'm. I'm actually not yet convinced that relying on referral marketing is risky. But Kendra, you can certainly change my mind today, and I believe you, you actually have some recent data, more recent than the last KITSA study, to share that I don't know, might influence me and others to start thinking differently about this strategy.

[Kendra]

Yeah, I, I love our different perspectives here and I'm really curious to see where we go, particularly as we go through a bit more of this. But the data that I'm seeing emerge is there was a FICOM study released in 2024 and we'll make sure we link to that in the show notes. And this study really looked at how people were finding advisors and how the referral process is impacted as the generations of age change. And essentially what they said is that there's a referral cliff coming. And the report really claims that the current generation of retirees is the last one. To view referrals as necessary in their selection of hiring a advisor in five or 10 referrals are going to matter far less than effective digital marketing. It was actually pretty interesting based off the different age cohorts. So Those who were 60 or above, 60% of they of those said that they would only hire an advisor, really based on a referral. And I think that's what we're really seeing right now, the current generation of retirees. But as you start to move through the decades, the data changes dramatically. So if we drop down to the next age cohort, which is those nearing retirement within the next five years, only 29% said they require a referral to hire an advisor. And then if you jump down to under 44, only 17% said they require a referral. So while I think that referral marketing can be effective and helpful, and it is really important to create a process for how people refer to you, the way that people find advisors is changing. So even if it doesn't feel like a concern now, I think the way that they find people, I want our listeners to really be aware of the fact that it's changing so that they can decide what is the best way to navigate changing consumer behavior.

[Taylor]

Yeah. And I think that that makes sense. Like, when we think about it, you know, you rewind. I don't know, 20, 30 years ago, there, there wasn't, you know, there wasn't YouTube. There weren't these podcasts full of great education. Yeah. I guess now, as I'm saying this out loud, there were certainly radio shows and, you know, print magazines and things where you could get information. But, you know, today, you. You can really get to know me personally and my views and my philosophy and my approach and how I speak and what I look like. Like, you can do all that online. You couldn't do that previously. You know, you could see the. The person's, maybe the adviser's picture, you know, in a magazine or a newspaper or. Or somewhere, but you don't really, like, know who that person was. So I can see why you'd want to rely more on a referral. So times have certainly changed. We. We can acknowledge that. I think maybe the question we should be asking is, you know, why is consumer behavior changing? Why are people relying less on referrals? And then also maybe why are people giving fewer referrals? Because I think that's part of it as well, or part of the fear that there's just people are not giving as many referrals. And I think, like all marketing strategies, I would just argue that referral marketing is just evolving. You know, I was thinking back, preparing for this episode. You know, not that long ago, you could grow your email newsletter by just having a simple form that says like, join my email newsletter. And everybody would put their email address in there. And slowly but surely learned that not every email newsletter is as great as it sounded like. And so all of a sudden our email inboxes are full of all these junky newsletters and consumers started to get pickier and pickier about giving somebody their email address. So now it can't just be join my email newsletter. It has to be like, download this free ebook or this 10 page checklist or this free video series. Like, we have to give them more value in order to get their email address. So email, you know, marketing has evolved. I was thinking back to like the really old days of like cold calling. And when I started at Morgan Stanley, that's what we did. And we would cold call with stock tips and that's how we'd get people engaged in the process. That doesn't really work anymore. You can't cold call people with stock tips. All this information is now available to everybody. And so now cold calling still works. We're not going to say cold calling is risky or cold calling doesn't work. You can't grow your practice with cold calls. That's just not true. It's just that it's evolved. Now you might need a cold call and invite somebody to what I would say is a middle of the funnel activity to build trust with them. Like, hey, I'm hosting a webinar for people just like you next week and I wanted to invite you. Is very different than like, hey, I've got a stock tip. So cold calling has evolved. People have been burned by scammers and slimy salespeople and Ponzi schemes and bad stock tips. And I think that these stories have spread more easily through social media and the Internet, et cetera. And as a result, it might just be that people are more protective over their personal data and maybe their reputation and they just aren't as quick to just send all their friends and family to you. And if we accept that that may be the case, it doesn't mean that referrals don't work or they're risky or, you know, this strategy just doesn't work. Perhaps it just means that referral marketing, like these other strategies has evolved and it's not as easy as just asking everybody, you know, to, to refer you to all their friends and family. Anymore, it might mean that you just have to step up your game and give them a better reason to refer their friend and loved ones. You have to get more clear about your process, the value you provide, what's in it for this person. In other words, I think we need to take ownership over the marketing process instead of blaming our marketing failures on, you know, this data, this, this research that trends that are changing or consumer behavior is changing. Because I think, and Kendra, I think this is one thing we agree on, is everything works, all this stuff works. But I think it is getting more challenging and we have to evolve with the times and we have to provide more value and create better processes and give people better reasons to. To not only hire us, but to prefer their friends and family.

[Kendra]

You touched on something I really like there, which is the evolving element of marketing practices. So the fact that sometimes we can say this isn't working anymore, but we just haven't really evolved with how marketing has changed over time, that's really important. I know as a marketer, I can feel really uncomfortable that the things that once we're working aren't working as well or as effectively. So really addressing that. And you know, even at minimum, if referral marketing has changed and it has evolved, which I do agree with you, I think people are way more protective over who they send to you. We need to start looking at it with fresh eyes, fresh perspective, and as you often point out, coming up with a predictable, repeatable process. If we are going to lean really heavily on referral marketing. And I think for a lot of advisors who do lean on that, I highly doubt most of them have this dialed in the way that they could to make it most effective for them. So let me tell you a little bit about why I think referral marketing can be risky. So for me, it actually stems back to a personal story. For many years, my agency was only relying on referrals. And because I only work with a handful of clients and they tend to stay with me for years at a time, I didn't really think twice about where my next client was coming from because it always really just seemed to, like, work out until it didn't. About three years ago, I had a really big personal life transition. And essentially overnight, my entire life in business was really, like, shaken up. And my goals and my income needs were transformed. And I very quickly realized I had zero control over not only where my next client came from, but the quality of my next client. And at one point I was even applying for fractional CMO jobs at other Companies as a backup plan, which is kind of crazy to think about now. But I know that for me, that was a big turning point for me in my approach to marketing for my business. That was only referral based. I knew it was a great marketer, but our industry didn't even know I existed. And that really brings me to the first reason why I think relying only on referrals can be risky. Which is referrals are nice, but control is better. And for me, I really needed a way to control my lead flow. And I couldn't be relying on just my clients to have great friends who happen to need an amazing advisor marketer. So what I did is I started to shift gears and I started to market my agency proactively in a very focused way. And fast forward to today, a few years later, I actually have a wait list to work with me and my team. And the thing I want to point out here is that did not happen overnight. And that's why I think starting now, before you need the momentum, especially if you're going to choose something like digital marketing is really important. When you only depend on just, you know, client referrals, you are not choosing your clients, your clients are choosing them for you. And sometimes that can work out amazing and other times it doesn't. But if you do market yourself in a high quality way, you'll have more control there. And so you'll be able to start to look at how do you want to attract the clients that you want to work with rather than just taking who was referred to you over a backyard barbecue or on the golf course. So for me, I found that I can't leave something as important as the revenue of my business up to chance. For me, hope is not a marketing strategy. So that's kind of where this started for me and why I think referral marketing can be risky if you're just a hundred percent relying on that and coasting on that.

[Taylor]

Yeah, I think you, you bring up a lot of really good points there. And I, I appreciate you sharing that story and, and I've known you through this transition, so I kind of, you know, watched it in real time. You know, it just kind of reminds me of, and I'm not saying this is you, I'm going to speak about like advisors just broadly here. When we ask an advisor, just average advisor, you know, how they grow their practice, you'll often just hear like, oh, you know, we get referrals, right? We get referrals very infrequently. Do I hear from an advisor that we have a very detailed, consistent process for asking for referrals, for handling those referrals, for communicating to the referrers how we're working with that referral. I very rarely hear an advisor tell me that they have a predictable path for growing their business with referrals. Just like referrals come in sometimes and sometimes they don't, and sometimes they're good referrals and sometimes they're not. If I'm not clear about who I work with, the process for inquiring with my firm, how to take action on my podcast, I would argue that my clients as a result will be attempting to choose me as well. If my website isn't clear, if I don't have the proper messaging, if I don't pay attention to the user journey and ensure that the right people are reaching out to me and scheduling calls, then I would say that my clients are probably attempting to choose me as well. I think the same thing about SEO. If I start writing for SEO purposes and I just get distracted by measuring the quantity of site visitors versus the quality, well, then I'm going to have potential clients that aren't a great fit for me trying to choose me. So I just think it comes back to having a really detailed process to train clients or COIs, who to refer, how to refer, what happens when they refer? How are you communicating with the referrers during the sales process? What happens when that person becomes a client? What if they don't become a client? How do you train your clients or COIs to know who to refer? How do you help them understand who to look for? I often hear from referrers or, you know, potential refers. How do I know if my friend or family member, you know, meets your minimum right or is the right type of person? So we have to help these people. We have to, we have to train them in a way and build this process out in order to have predictable growth from this referral marketing strategy. So again, I'm just not totally convinced that, you know, you lose control with referral marketing. I think you certainly lose control if you don't have a process in place. Because all of this just comes back to predictable sustainable long term growth we want to get away from. Sometimes I get referrals and sometimes I don't. We want to get closer to. I know if I do these five things every single week, then I'm going to get a steady stream of high quality referrals and in turn my practice is going to grow.

[Kendra]

One question I have for you is because I Hear a lot of advisors talking about getting referrals, but have you seen many advisors who really have that referral process dialed in?

[Taylor]

Yeah, again, I don't hear about somebody having a really detailed referral process, something that are really committed to very often. The only person I can think of. And the last conversation I really had about this was with Tiffany. Charles is an advisor out in Colorado, and I did an interview with her on my other podcast, Experiments in Advisor Marketing, years ago, and I was really drawn to her approach to referral marketing. She had just a very structured process for not only reaching out to COIs and befriending COIs and building up her COI network, but also working one to one with the COIs, setting clear expectations about what the relationship was, that we're not here to just have fun and go to concerts and play golf and get drinks after work. We're here to refer business to each other. She went as far as having an actual agenda and tracking the progress of referring referrals that they were making to each other over time. If that person was not interested in committing to referrals, then she just, you know, stopped the relationship. I'm move on. I'm going to go find a different, you know, referral partner. So I just appreciated how intentional she was with her process. And in turn, she had a lot of success with it, but she spent a lot of time building out that process, just like I would spend a lot of time, or I have spent a lot of time building out, you know, my podcast and my marketing funnels. So it's very rare that I hear somebody with that much intention. I mean, I think we brought this up in a. In a recent episode, Kendra. You know, these, you know, insurance salespeople catch a lot of flack for pushing the. The piece of paper to the other side of the table with a pen and, like, write down five names. But you know what? They're consistent with it. They have a process in place and it works like it actually works. Now, it doesn't feel good to me. It's not authentic to me. Not something that I'm going to implement. But they have a process, they're consistent with it, and it does lead to predictable growth, which is, again, what we're looking for. So, yeah, it's just. It's rare that I hear that somebody has a process that they're fully committed to. It's usually this just like, you know, I ask for referrals, or sometimes clients give us referrals. And, you know, if I stick around long enough My practice will grow.

[Kendra]

And you point out an interesting distinction there. So to me, from a referral standpoint, there's current client referrals and there's COIs. I see COIs as a different marketing channel and different approach because for me, COIS is gangster. Works great. I actually do pretty proactive, you know, vendor partnerships, relationships, and that was huge for me. But I had to become very systematic at it versus just relying on my current clients to send me amazing people to work with. So when I look at referrals, I split them independently. Referrals with current clients and referrals from COIs are different. And we have a different approach when it comes to referral marketing.

[Taylor]

Oh, yeah. I mean, that is a good distinction to make. And in fact, in the Kitsas marketing research study, which we'll link to in the show notes as well, he makes that distinction. And when I shared the effectiveness of referral marketing and I mentioned the average revenue per client referred of over $15,000, that was specific to COI referral marketing. Client referrals is actually third on the list with the average revenue per client of $8,900. So still a great, effective, efficient marketing strategy. But, you know, if you really want to grow your practice and really lean into referral marketing, it does appear that cois is probably the best path to go. But again, I'm still not convinced that leveraging a client referral marketing strategy is a bad idea or it's risky or it doesn't work. It might be more challenging, you know, trying to train my clients how to determine if somebody, if they should refer somebody or not, what to look for. The types of people like that that is challenging can be an awkward conversation versus a CPA who literally has the client's tax return, or an estate attorney who knows everything about this client's life and what their pain points are and what their needs are, and they know that this person actually has problems that we can solve is just very different. So maybe we can agree that, you know, client referral marketing is maybe more challenging, maybe less efficient, maybe less effective, but it doesn't mean it can't work. And it's still, you know, one of the top three strategies here. And I'm looking at a list of 20 of them. So it's still, still certainly effective and efficient, but maybe not as efficient and effective as COI marketing.

[Kendra]

Yeah, I think really when I. When I'm thinking about these topics here, I'm primarily really thinking about your current clients referring to you. And it's wonderful that's amazing. That can be a great stream of revenue if you add on COIs. To me, that is enough diversification and that is exactly what I did to start and it, it has been really effective. So that's a really good distinction there and I agree with you. So let's move on real quickly to a couple other thoughts around referral marketing. One of the reasons I think that referral marketing only just from your current clients could be really, really risky is that with consistent marketing and you have, you know, let's just say even if you were doing current clients and COIs, you're going to earn the freedom to pick and choose who you work with. If you know a prospect that gets sent your way is too focused on maybe chasing stocks or their personality rubs you the wrong way, or even if you've outgrown a current client, you can gracefully part ways when you have more leads than you need. And I think honestly this is the best part about diversifying a little bit, is earning that freedom to be picky and you can really build your firm around people that you love to work with. This is not just about growth, it's also about making sure you're building your business as a place that you enjoy being every day. Now, this definitely was not a privilege I personally had when I was only reliant on client referrals. Even though I did really love most of my clients, I didn't love all of my clients. And now because I have a diversified approach, I only work with kind and coachable advisors who have a long term perspective on their marketing. So really having the ability to pass on a new client or fire a current client has been remarkable for my mental health just as a business owner. So that ability to be picky when you have a more consistent lead flow that you feel like you can control because I did not have that freedom. Without a diversified strategy here.

[Taylor]

Can you think of a way where you can be picky with referral marketing? Because I'm just not sure that gets so black and white that if I pursue and let's, let's talk about client referral marketing here, does it really prohibit you from being picky about the clients that you're taking on or the potential clients that are reaching out?

[Kendra]

Yeah, I'm definitely able to be more picky now than I was before, particularly around choosing advisors that I think I can really do great work for and win with. Whereas before I was more reliant on, you know, what they needed. And I have less control over choosing who I worked with. Whereas Now I do have that ability and I still try to help, you know, people that come to me that I can't. Maybe I gave them a resource or another vendor. I'm really grateful for, you know, the people that reach out to me. But again, I think for me, if you don't have enough people coming through the front door and overnight your revenue changes, your revenue needs change, somebody else walking through the front door, you might have to take them. I did have to do that when I kind of had this big personal life change and I had a client come on board that I wouldn't have taken if I'd had another choice. They weren't the worst human on earth, but they weren't a long term fit personality wise. And I had to make a little bit of a concession because I needed to pay my rent. Like I just needed to have more income coming in with just some changes I had. So, yeah, I mean, for me, I did earn the freedom to be picky, but maybe that's not the case for everyone. Maybe they don't face that same challenge as I did.

[Taylor]

Yeah, yeah. It's funny, I kind of glossed over the, the working title of this episode here, the Risk of Relying on Referrals. And I, I just heard you say, you know, I was reliant on referrals and that was risky to me. And I think what, what that really means to me, like when I heard you say that, again, like I was reliant on referrals and that wasn't working for me and I didn't have this freedom to be picky. What I'm hearing is you just weren't maybe clear on the exact type of client that you wanted to work with. And I know, you know, we were friends years ago and you were working with all different people in kind of different industries and professions. And so you weren't extremely clear about who you wanted to work with, the types of people you want to work with, and didn't have a great funnel in place to attract those people. And so the only way for you to add more revenue was just to accept the referrals that were coming your way. And I'm putting some words in your mouth, so feel free to correct me here. But I think that that word like reliant on referrals is really important. Instead of relying on referrals, I'm just going to go back to if I want to pursue referral marketing, if I want to have success with referral marketing, I don't know, rely on them. But I'm going to have success. I'm going to grow my practice with referral marketing. I have to get really, really clear about the referral marketing funnel and building a detailed process to ensure that the right types of people are reaching out to me, that I do have the freedom to be picky, that I've trained my client or coi. If they refer somebody who is not a fit, here's how I handle that. Because not everybody's going to be a great fit. Not everybody who reaches out for my podcast is going to be a great fit. So I can still be picky with referrals, But I built a process so that when somebody does refer somebody to me, it's not a fit. Here's how I handle it. Here's how I communicate. Here's how I ensure that they get the help that they need. And I think that you still have potentially the ability to be picky with referral marketing. But we do have to, you know, really own this strategy, Put a lot, a lot of time and attention into building out those processes to ensure that we have that success and we have that freedom when we're growing our practice the right way.

[Kendra]

Definitely. And I think if you are an advisor who approaches this with a very defined, here's exactly who I love to serve. Here's exactly who I would love for you to refer them to me, and what that process looks like, we're having a different conversation, because I don't think a lot of advisors are doing that. They're kind of just shooting from the hip and hoping people that refer or they feel uncomfortable asking for recommendations. And for me, and I don't know, I think it also depends on the size of your firm. Like, I didn't have hundreds of clients that I could ask for referrals, and eventually that could tap out. And I found that the clearer I got on who I love to work with, the less referrals I actually got from my clients. But this could be different for some advisors if they have a larger, you know, book of business, more clients. But I think the important distinction that is coming up here that we both agree on, is that if you are going to rely on referrals as the primary organic growth mechanism for your firm, it cannot be left up to chance. There has to be a predictable, repeatable process that you've dialed in, that you've tested, that you continue to evolve and improve. If this is going to be a major, you know, cornerstone of how you drive growth.

[Taylor]

Yeah, I agree.

[Kendra]

Awesome. So one quick last thing here. Just on the referral front. You know, I think that also if you are being thoughtful about marketing, it can really help you attract better talent. So most people that you hire, if they're very talented, they want to have an insider look on, you know, what you believe, how you serve clients, your approach. And you know, you may not even be looking to add a lot of people to your team. It could just be maybe you want to add one or two advisors or maybe a client services association associate. And I think marketing can really help keep your firm on the radar. You never really know who's watching or who you might need as your firm grows. One of my current clients, they've been growing at an outrageous pace and they really needed to hire a total gangster client services associate. And they were able to attract someone from a very large, you know, firm and association that we're all familiar with. And the reason they said that they decided to work with this team is because of the marketing that they are doing on LinkedIn. So I think that great marketing isn't just about clients, it's about a lot of other things. Not only just the freedom to kind of control a little bit of your lead flow, but also the ability to be picky. And finally, I also think just being a magnet for great talent. So then again, this is a forethought. This doesn't happen overnight. But I do think being thoughtful, even if it is something as simple as, hey, we're going to really dial in our referral process and get that clear and effective, or maybe we'll expand that to cois because maybe you consider that referral marketing as well. To me, COIS is a different approach than my current clients, but there's a lot of different pieces that come with being more proactive and intentional about your marketing that I think a lot of advisors just kind of overlook when they're just kind of coasting on referrals.

[Taylor]

Yeah, I think that's a really good point. I'm really glad that you brought that up because it is really important, especially in, you know, the current stage of our profession where, you know, historically advisors were required to do business development. You know, going to be a financial advisor, you had to go find your, your clients. It was, you know, you were alone on an island trying, trying to grow. Now there's a lot of great positions where you could be an amazing financial planner and not have to do any business development. You could work for a great firm with, you know, a great pipeline of high quality prospects really dialed in marketing funnels, and you just get to be a Great financial planner. So you bring up a good point that if you have your, your marketing really dialed in, and again, it's predictable that you can attract really great talent that just wants to be really great financial planners. They don't want to be salespeople. I'll just go back to, you know, that referral marketing can be that great strategy. You could have an amazing referral marketing strategy in place, even a client referral marketing strategy in place that helps to attract great talent. Like, hey, come work for us. Because we have this great strategy in place where every single week we get X amount of referrals from our clients. These are great people that we enjoy helping with and we have a great process to do it. And you don't have to do any business development now. You have to have a way to communicate that to, you know, the profession at large to help attract these high quality team members. And I'll certainly side with you and say that, you know, in the digital world it's much easier to showcase if you have a, you know, a great podcast or a great YouTube channel and, you know, talent. Other advisors are seeing this and watching it and seeing your success is much easier than referral marketing, which is often, you know, boots on the ground and behind the scenes. So that certainly is a benefit to these digital marketing strategies. But, you know, being able to have a great referral marketing strategy and being able to communicate that to potential hires, I think still helps to put yourself in a good position to attract great talent. So, you know, we've talked about a lot here and you know, for me, at the end of the day, I'll just say that, yes, if you're just, you know, passively relying on referrals and hoping they come in and hoping that they're high quality, yes, I think it's a giant risk. You're probably going to go through periods where you get some good referrals and you know, you start to convince yourself that the strategy is working and then you're going to go through these periods of time where nothing is coming in the door or all the referrals you're getting are not great fits. That's what we want to avoid here. We want to have this, this predictable approach to market, this predictable path for growth where if you know that you're doing these things on a consistent basis, you have the process in place, you know, more or less how many people are going to reach out to you and how many people are going to hire you every single year. I have some thoughts on kind of the Next step and, and what to do next. But Kendra, what are your thoughts? How do we can, how can we help our, our listeners take action here?

[Kendra]

Yeah, I think that we've had a pretty interesting conversation here and what we've come to agree on is that if you are just haphazardly hoping people send amazing prospects your way, you are at risk. If you dial in a thoughtful, intentional strategy that is also tied to KPIs and being measured and being thoughtful and proactive and you, you do have some of those maybe tough conversations where you ask for referrals in a way that still feels organic and authentic to you, then I can agree with you, Taylor, that that can be a less risky approach to growing your firm. At minimum. I'd probably extend that to cois just because I think then you're not just relying on your client base and tapping them out. And I think cois is such a great form of marketing, but just left to its own, I think that haphazardly relying on referrals for growth, I, I do think you are at risk.

[Taylor]

So, yeah, my suggestion here for, you know, the next step, if you know you're engaged in referral marketing or you want to lean on referral marketing is number one to throw everything else away. Like, if you're going to have success with referral marketing, right, we're not just going to rely on it and like hope referrals come in, but we want to have predictable success with referral marketing. We're going to push all the other marketing strategies to the side. All these digital marketing strategy distractions, we're pushing everything to the side. And my suggestion would be to go back and listen to the marketing funnel episode that we did, Kendra. It was an hour long episode. There's a lot of great information in there and think about referral marketing through the lens of the marketing funnel. You think about the top of funnel activity for referral marketing. If it's COI referrals, where are you going to get visibility in front of these cois? If it's clients, how are you going to get visibility in front of your clients to have this conversation about this referral marketing strategy? So you know, with client referrals that top of funnel might be. Well, you know, every time I have a review meeting with my client, I have this conversation about how to refer, who to refer the process. Right. It's kind of like that top of funnel, just bringing awareness to this referral marketing strategy. And you can kind of go down the funnel from there. I think coi Marketing is probably a little bit more relatable. So top of funnel, where are you finding cois? How are you getting visibility in front of them? It might be going to a business networking group every single week. Right? You're shaking hands with COIs and getting to know them. That's your top of funnel strategy. Next, how are you going to, you know, move those people to the middle of your funnel? How are you going to nurture the COIs, build trust with them? It can't just be, I'm going to go play golf with them, like, hope they give me referrals. No. How do you get really intentional about moving them to the middle of your funnel and building Trust with the COIs, showing your expertise and training them and showing them your process for helping your clients and how to refer people to you. So think through the marketing funnel, through that lens. You're going to choose one activity for the top of funnel. You're going to choose one activity for the middle of the funnel, and you're going to have that bottom of the funnel sales process, and you're going to be really intentional and really process oriented and you're going to commit to it. And if needed, you might decide, I need to hire an expert here, that this is a really challenging funnel for me to build on my own and I might hire an expert. And there's some great referral marketing experts that are out there. There's great people like Kendra, there's great agencies out there. But, you know, you might need some help as well. So I would just push everything aside and you're just going to obsess over this one single strategy. And if you do that and you're really intentional and really clear, I'm confident that you will have success. Yeah, we can't just passively rely on referrals and, like, hope our business grows a hundred percent.

[Kendra]

Agree. And if for some reason you're finding this thought process of going to, you know, a COI networking event that just makes you cringe, like starting to take this very seriously, that could also be your sign that this is not the right marketing funnel for you to build for your firm.

[Taylor]

Totally makes me cringe. I don't want to do it. I don't either.

[Kendra]

That sounds terrible. But, you know, we have had interesting episodes. You know, we had Paul on the podcast with a really interesting episode how he loved to, you know, build relationships with people. So coi relationship building for him could just be. That could be his sweet spot, you know, so if you are finding that that is not the way that you want to build your firm approach to growing the firm, then just like Taylor said, I would go back and look at the marketing funnel episode and where is that place that you're going to get attention and then build trust so that when people are ready to hire an advisor, you're the only person they think of, or, you know, when they're looking to refer out to an advisor, you're the only one they think of. So I think what we've come to understand today and what we've come to agree on is that if you are just haphazardly coasting on referrals from your current clients, that there needs to be a predictable process in place if this is going to be the way that you grow your firm. And if putting a predictable process in place makes you throw open your mouth a little bit, this might not be the way that long term you should be looking at securing great people to work with.

[Taylor]

I'm so glad he brought up the authenticity side of this because, you know, you can get lost in the data and the research and, you know, look at the, the Kitsis marketing study and say, okay, it looks like, you know, coi marketing or client referral marketing is the way I should go. It's the most efficient, it's the most effective, it's the highest average revenue revenue per client. And you can start to pursue that strategy and feel really uncomfortable and really inauthentic about it. I'm looking at this list and, you know, the two things that I focused on most are at the bottom of the list. You know, podcasting and, and website and, and SEO and blogging are at the very bottom of, of this list in terms of revenue, average revenue generated by the marketing strategy. So if I was solely relying on this list, I wouldn't be probably having this success. And, and as fun as I'm having in my marketing journey here. So it does need to be authentic to you. You know, I historically had tried shaking hands at BNI networking groups and just, it just didn't register. And I think, I think it's good to get yourself out of that comfort zone and try different things, but you do have to pay attention to how you feel. And I remember walking out of this meeting like, I hated that. I never want to go again. And every single Friday when it came up and I saw it on my counter, I'm like, gosh, I really don't want to go. Gotta pay attention to those things.

[Kendra]

Absolutely. So if you're thinking that maybe referral marketing, you want to get more intentional about that. Take out a look at Paul's episode. We talk a little bit more about how he he leverages those relationships. If you've heard this conversation, you're like no thanks. I'm kind of over relying fully on these referrals just for my current clients. Go check out our episode on Marketing Funnel Basics before you swap to another platform. We want you to have a clear, simple, straightforward plan on how are you going to get in front of people and inspire them to trust you before they hire you. So let's be thoughtful and intentional regardless of the path that you choose. And if you have any follow up questions or you have any additional feedback you want to give us about referral, marketing or any other questions that you'd like us to answer on the show, make sure you jump into the show notes real quick and sign up for our email list. That's going to be the fastest way to give us feedback or questions about this episode. We hope you enjoyed today's episode. To get the resources shared or sign up to join us as a guest on one of our advice line episodes, check out the links in the show show notes. Thanks for listening and we'll see you next week.