While there are, clearly, a number of reasons why an investor may or may not feel inclined to refer their advisor, more evidence suggests that referrals could be an unexploited track to success for some industry players.

Referrals may seem to be the most prevalent way in which clients demonstrate their loyalty, but when a group of over 3,000 affluent investors (scoring 83.26 on a 100-point loyalty scale) were asked by Spectrem Group how often they refer others to their financial institution, only 9 per cent said “very often” while 30 per cent said they never do and the largest portion – 61 per cent – indicated “sometimes.”

Almost half of those polled said they do not refer their friends and family to their preferred service providers or businesses because they “do not feel it is their place to tell others where to go or what to buy,” Spectrem said. Around a third said they simply don’t think about referring others and just under 20 per cent “don’t want to seem pushy.”

“I don't think that investors are frequently asked for referrals from their friends,” Catherine McBreen, managing director of Spectrem, told Family Wealth Report. “Money seems to be one of those issues that certain generations of investors still don't openly discuss. I think for many...they hadn't referred because they hadn't been asked rather than refusing to refer because they feel that their advisor is doing a poor job.”

Meanwhile, according to the Futurewealth Report 2014: The Advocacy Impact – which is based on a study of 3,025 wealthy individuals by SEI, Scorpio Partnership and NPG Wealth Management – advisors double their chances of receiving a referral simply by asking for one. Although 47 per cent of respondents said they would actively refer without being prompted, an additional 47 per cent said they would refer, but only if asked.

“I think most advisors hold back because they don't want to be seen as imposing on their clients,” McBreen of Spectrem said. “Some advisors are more compliance and legal oriented in their approach, depending on their background. These advisors are less likely to ask for referrals as opposed to an advisor that has primarily been a salesperson.”

She added: “I also think some clients would perceive it positively and others would perceive it negatively. About a third of the wealthiest clients never recommend their advisor. These are the clients that might not want to be asked...but it's truly the advisor's call to understand the personality type.”

“It’s well known that a referral is one of the strongest tools in an advisor’s marketing arsenal, and what we’ve learned is that there is no exact science to winning client referrals,” said Alfred P West Jr, chairman and chief executive of SEI, when speaking about the Futurewealth findings previously. “Client behavior and confidence in advisors varies based on personality, age, and location, and, thus, is unpredictable. However, by taking action wealth managers increase their likelihood of organically growing their business.”

But how do we know that financial providers and advisors do indeed receive the largest percentage of their clients through referrals, and is this applicable across the wealth management board?

“We did not interview advisors, however, when we meet with advisors they consistently indicate that they receive most of their business through referrals,” McBreen said. “Additionally, in the research we do with investors on an ongoing basis, more than half of investors consistently indicate that they found their advisor through the referral of a friend, family member or business associate.”

As highlighted by SEI previously, the propensity to recommend doesn't necessarily result in actual referrals, as they are triggered by a blend of circumstances and financial behaviors that are also influenced by a client’s age and geographic background. But referrals are still largely regarded as a key part of the client acquisition process in wealth management.

Indeed "investors are telling us service quality is the foundation of client loyalty,” said George Walper, president of Spectrem. “And loyalty based on building a strong relationship is the key to convincing clients to make referrals, which are an important way to generate new business.”

The respondents that took part in Sprectrem's study had a household net worth ranging from $100,000 to $25 million.