Building a financial planning business with referrals from COI’s

August 12, 2020 AEST

Are the things we have been taught about referrals still ringing true? Or were they wrong from the start? Hear what academics, industry experts and financial advisers have to say.

Building your financial planning business with referrals from centres-of-influence (COI) is an important source of new business for professional financial advisers. Further, referring clients to other trusted and competent practitioners is critical to discharging a professional’s fiduciary duty. Doctors refer all the time. so why don’t financial service professionals?

What the Literature Says

A review of Australian and US academic and trade journals found that there were often conflicting views.

Q: How to gain referrals?

Alison (2010) believes there is only one sure way to get referrals and that is to simply ask for them. But, Wershing (2011) points out that many of the old methods and tricks that supposedly generate referrals, such as asking for them, simply don’t work – but are still being taught.

Q: Why do people refer clients to a financial adviser?

  • 57% said it was because a friend described a financial challenge
  • 48% said it was because a friend asked for a recommendation, but only
  • 2% said it was because the adviser asked for a referral.
(Wershing, 2015)

Q: Will people refer clients to a financial adviser? Julie Littlechild has conducted multiple surveys in her financial services series in the US, The Economics of Loyalty and she reports:

  • 83% said they are comfortable providing a referral, but only
  • 29% actually provided a referral in the past year, and only a few of those referred prospects actually made contact with the financial adviser. Therefore, to the adviser it may seem that only
  • 2% of all clients are actually referring
(Julie Littlechild, 2008, 2010, 2011 and 2014).

In support of this, Richards writes that the line: “referrals are the most sincere form of appreciation” is often found in financial adviser’s emails or on signs in their offices, but in 20 years of working with advisers he has seen few cases where this tactic has actually worked (Richards, 2011).

What Australian Financial Advisers Say

I recently conducted research with financial advisers in Australia. Here are a few of the questions explored:

Q: Why do your COIs refer their clients to you?

  • 63% said they want “to help their clients”
  • 20% believe it because they were “acting in the client’s best interest”
  • 10% said the referral partner’s clients “asked to be referred”, and only
  • 1% believe the referral partner wanted to help them “build their business”.

Q: Why do your existing clients refer their family, friends or colleagues to you?

  • 54% believe they “want to help their family, friends or colleagues”
  • 20% said they “were asked for advice on a financial matter”
  • 18% reported that they “were told about a financial issue they were facing”, but only
  • 4% said “because the advisers asked for a referral”.

This supports Wershing’s (2015) proposition that people make referrals to help other people, not to assist the adviser and not because the advisor asked for them!

The FASEA Code of Ethics has made referrals between finance professionals problematic, particularly where payments for the referrals are involved.

Before going into a referral relationship with a new COI it is often good to gain an understanding of why other advisers had a previous referral relationship fail – so you don’t make the same mistakes.

Q: If a previous referral relationship failed, why did it fail?

  • 38% “I did not drive the relationship”
  • 30% “I was too busy to engage productively in the relationship”
  • 29% “they did not understand the necessity to refer”
  • 26% “they were too busy to provide referrals”
  • 12% “we just didn’t gel”
  • 11% “there was a lack of trust”.

Interestingly, only 9% of the financial advisers surveyed claimed that “they have not had a referral relationship that failed”.

What are Financial Advisers in Australia doing to drive referrals?

It takes the right referral plans, tools and hard work to find the right referral partners and provide them with the right level of coaching. Here are a few of the findings:

Only 30% of the advisers surveyed reported receiving 20 or more referrals in the previous 12 months. Of these 30 advisers:

  • 14 advisers received between 20-29 referrals
  • 8 advisers received between 30-39 referrals
  • 3 advisers received between 40-99 referrals
  • 5 advisers received 100+ referrals.

So, what are these advisers prepared to do that the others are not?


Those advisers succeeding in getting referrals were more proactive in seeking referral partners.

Q: How many potential referral partners did you “_______”? (Top 30 vs Others)

  • make contact with 15 (vs 14)
  • meet with 11 (vs 9)
  • engage with 8 (vs 4)
  • stick with 6 (vs 2)
  • happy with 4 (vs 2)


When the Top 30% ‘coached’ their COIs to teach them how to refer, and what kind of ideal clients they wanted to receive, they were prepared to conduct more of the harder and more time-consuming training. So, not just the ‘what we do’ and “how we do it” type of training, but also coaching them on ‘our processes’, taking them through ‘case study’ examples and providing them with “demonstrations”.

Referral Networking & Marketing Plan

Those practitioners who succeeded in getting more referrals were more likely to have a written plan and conduct more regular partner referral meetings i.e. ‘fortnightly’ and ‘weekly’ rather than ‘monthly’, ‘irregularly’ or ‘never’.

Business Model

They were more likely to set up formal Joint Ventures (JV). While monetary incentives like “fee splitting” now contravenes the FASEA Code of Ethics we will no doubt see more multidisciplinary businesses and JVs in the future.


Those advisers succeeding in getting referrals were more proactive in providing tools for their referral partners to use.

Q: “What referral methods or tools do you use?”


For financial advisers to have a successful referral arrangement with their COI’s takes work. Those that have the best results (20 or more referrals a year) have the following in common. They:

  • understand that referral partners and clients often refer for their own reasons, not the adviser’s
  • acknowledge that some of the old methods just don’t work (like asking for referrals)
  • are prepared to do the hard work required to identify potential referral partners
  • find COIs that are a good cultural fit, and who have the same type of clients
  • are in the same business growth cycle as their COIs
  • are prepared to put the time and effort to train the referrers
  • provide the tools needed to enable them to refer
  • meet with them regularly and provide regular feedback
  • drive and manage the referral relationships

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