Many wealth managers are missing out on a huge opportunity to acquire more clients because they aren’t asking for referrals, according to a global study of 3,025 wealthy individuals released today.

Many wealth managers are missing out on a huge opportunity to acquire more clients because they aren’t asking for referrals, according to a global study of 3,025 wealthy individuals released today.

The study, The Futurewealth Report 2014: The Advocacy Impact– published by SEI, Scorpio Partnership and NPG Wealth Management - found that advisors double their chances of receiving a referral by simply asking for one. For example, 47 per cent of respondents said they would actively refer without being prompted while an additional 47 per cent said they would refer - but only if asked. The issue is apparent when considering the finding that just 30 per cent of those surveyed reported being asked for referrals by their wealth managers at least once a quarter.

That said, it was found that the propensity to recommend doesn't necessarily result in actual referrals, as they are triggered by a “complex blend of circumstances and financial behaviors and are heavily influenced by a client’s age and geographic background,” the report said. Indeed, Ryan Hicke, senior vice president of the SEI Wealth PlatformSM, highlighted that the high net worth global investor base “cannot be lumped into one single category.”

There are obviously a number of driving factors behind an investor’s decision to refer their wealth manager to friends, colleagues or family members. But what is “undeniable,” according to Kevin Crowe, head of solutions at the SEI Advisor Network, is that wealth managers who directly ask for referrals on a consistent basis are more likely to get them.

“Furthermore, the more successful advisors we work with have found that facilitating actual ‘introductions’ as part of the referral process increases the likelihood the referral will actually become a client,” Crowe added.

The insights may seem surprising considering how wealth management is often very much thought of as a people's business. In an Aite Group report last December, meanwhile, it emerged that banks and other financial institutions are achieving more success in securing client referrals to drive future business growth (the banking industry's referral performance score increased by 55 per cent from 2012 to 2013.)

“Referrals may be the most prevalent way in which consumers demonstrate their loyalty to a company or a brand, but people have other objectives for referring - objectives that benefit the referrer and not just the product or company being referred,” that report said.

Sparking client advocacy

“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. “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.”

For example, it emerged that those in the Americas are most positive about their advisors – yet this group have referred the fewest clients to their firm (five) compared to their European and Asian Pacific counterparts (seven and eight referrals respectively.)

In terms of age, those respondents under the age of 40 - four in ten of whom are asked by their wealth manager for referrals on a quarterly basis - referred the most clients (nine). Unsurprisingly, then, the oldest group polled (over 60) - who are asked quarterly for referrals only 8 per cent of the time - referred the least (four). In Asia Pacific, the region with the highest average number of recommendations, nearly 45 per cent of clients are asked for referrals quarterly.

The report is the last in a four-part series looking at the findings of the Futurewealth Project, which involved surveying thousands of individuals globally with an average net worth of $2.9 million.