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Advisors whose experience can be measured in decades likely have client rosters that are, to some extent, comprised of referrals.
Of course, some form of external marketing is always necessary. After all, that’s how an advisor gets some clients in the door to bolster the referral pipeline. Successful advisors know that one referral can create a positive domino effect because one satisfied client tells a colleague, friend or relative about the advisor and that person becomes a client and so on.
Sounds great and, in theory, it sounds efficient. However, as is the case with seemingly everything else in the advisory business, referrals are changing. Specifically, the importance of referrals as a client acquisition tool is diminishing and will continue doing so in the years ahead. The replacement is, not surprisingly, more technology. That implies advisors would do well to consider the following data.
Referrals Are Old School
When it comes to referrals, there are clearly defined demographic trends advisors should be aware of. Put simply, the older a client is, the more likely they are to require a referral.
That much is confirmed in the recently released “2024 Consumer Insights Study—Digital Marketing in Wealth Management” conducted by Fincoom Partners. Folks 60 years old and up are likely to want a referral from an advisor, but prospects younger than that aren’t that picky when it comes to referrals.
“While 60% of respondents over 60 say they’ll only hire an advisor based on a referral, only 29% of those nearing retirement report needing a referral to hire an advisor,” according to the research firm. “There’s an even more dramatic shift compared to the younger age groups: only 17% of respondents under 44 say they require a referral. Instead of relying on referrals, 45% of respondents nearing retirement and 57% of respondents under 44 hired financial advisors based on digital marketing.”
That underscores the importance of digital marketing. Forty-four years old and younger is the youngest of Gen Xers as well as all millennials and Gen Z – all of whom are coveted by advisors. The point is advisors need to up their digital marketing games and they need to be versatile.
“The survey indicated that no one digital channel was superior to another, rather that a mix of digital channels was required to generate enough touchpoints to move a prospect into the funnel,” adds Fincomm.
Digital Marketing Could Bring Efficiencies
There’s nothing wrong with referrals and even technological advancements will not kill that form of client acquisition. It is human nature to feel and see value in a recommendation from a friend or family member.
That’s good news for advisors, but there is also an efficiency case to be made for enhancing a practice’s digital marketing capabilities. Think about it. Converting a referred prospect into a client requires some legwork, but that effort is more efficient on the digital side.
“The research also showed that 64% of the effective marketing tactics were digital, and showed that not one tactic outshone another. A minimum of 2 digital interactions were required before the consumer took action—with the ideal number of interactions being 5+,” concludes Fincomm.
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