Financial advisors are operating under the impression that their clients are willing to provide referrals for them much quicker than they actually are.
The findings, contained in a recent report by Prudential Financial (Prudential) found that financial advisors’ miscalculations regarding the time it takes for a client to be comfortable enough to provide a referral could be impacting their practice. If referrals — a major source of business for financial professionals — are not manifesting as quickly as imagined, advisors may need to recalibrate their projections and look at alternative ways to drum up business.
Prudential’s report, “Referrals: A Matter of Trust” was based off of data collected in 2011 from 800 clients and 400 financial professionals. The report found that clients take an average of 4.8 years to be comfortable enough to recommend a financial advisor, more than twice as long as the 2.1 years advisors anticipated.
The report found that clients experience a high degree of social risk when it comes to recommending an advisor. There is a palpable concern that the referral may backfire (either because of a downturn in the market or because of ineptitude on the part of the advisor) and a scenario where friends or family enter into financial hardship due to their referral is a terrifying one for them.
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Client survey respondents stated that recommending a financial advisor has higher social risk than recommending an accountant, primary care physician or dentists.