There are a lot of figures that get thrown around about attracting new clients in the advisory industry. One that we frequently hear at InvestmentNews Research is that approximately 70% of a typical advisory firm’s new business is referral-driven. In a 2012 study we conducted, the typical firm had earned nearly 50% of their new revenue in the prior year from client referrals alone. If professional referrals are included, that figure jumps to 70%, positioning referrals as by far the number one source of new business.
In this year’s InvestmentNews Financial Performance Study of Advisory Firms, we asked advisers: Do you have a formal, standardized process in place at your firm for asking for referrals from both third-party professionals and existing clients?
What we found surprised us. Only about one out of every three firms have a formal process, which tells us that firms often take a passive approach to a strategy that accounts for the lion’s share of their new business.
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