Which elements of a financial planning relationship may be linked to client referrals?
Research reveals a strong link between advisors addressing the psychology of financial planning to more frequent referrals by clients.
2 minute read
Key takeaways:
- While many advisors understand common investor emotional biases and cognitive errors, fewer may have been trained on how and when to execute appropriate intervention strategies.
- A new study analyzed the relationship between the services offered by financial advisors and a client’s frequency of making referrals. Among the services investigated, psychology of financial planning was strongly associated with a higher frequency of referrals.
- For financial professionals seeking to strengthen existing client relationships and generate more referrals, adopting a new – or increased – focus on investor psychology may prove a rewarding path.
Why did we conduct this research?
Client satisfaction is critical to the long-term success of financial advisors. There are several ways to measure satisfaction, including the frequency of referrals. After all, only the most satisfied clients are likely to refer their financial advisor to friends, family, and professional colleagues. This research investigates the elements of a financial planning relationship that may be connected to the frequency of clients making referrals.
Why is this research important?
According to the CFP Board of Standards, there are six elements of financial planning client engagement: Risk management through insurance planning, tax planning, retirement planning, investment planning, estate planning, and the psychology of financial planning. Financial services professionals can increase client satisfaction by amplifying those elements associated with a higher frequency of referrals, while also using referrals as an avenue for organic growth.
What did we learn?
Based on survey data collected by the CFP Board in 2024, we found strong evidence that offering services related to the psychology of financial planning was strongly associated with a client’s frequency of referrals. We can therefore posit that clients receiving these services are likely more satisfied with their advisor relationship compared to clients whose advisors are not addressing the psychological aspects of financial planning. The findings also revealed a more modest relationship between retirement planning and estate planning and frequency of referrals, while no evidence was found to support a relationship between frequency of referrals and risk management, tax management, or investment management.
What are the takeaways for advisors?
Financial advisors who are well versed and trained in the nuances of financial planning psychology are more likely to have satisfied clients who generate more referrals. Wealth management institutions should evaluate their existing training programs to ensure these elements are included. Gaps can easily be closed by engaging one of the many third-party accreditation programs available in the marketplace or leveraging the expertise of asset manager partners.
2 minute read
Key takeaways:
- While many advisors understand common investor emotional biases and cognitive errors, fewer may have been trained on how and when to execute appropriate intervention strategies.
- A new study analyzed the relationship between the services offered by financial advisors and a client’s frequency of making referrals. Among the services investigated, psychology of financial planning was strongly associated with a higher frequency of referrals.
- For financial professionals seeking to strengthen existing client relationships and generate more referrals, adopting a new – or increased – focus on investor psychology may prove a rewarding path.
