Client referrals are a key part of growing and sustaining a financial planning practice. Understanding why clients refer and how to encourage them can help financial professionals create an effective referral strategy.

At its heart, giving referrals is a natural, pro-social behavior—people enjoy helping others and feel good about doing it. This cycle is a “virtuous loop” of giving and receiving where referrals benefit everyone involved: the financial planner, the client making the referral, and the referee.

While there’s no magic formula for generating referrals, industry research can shed light on what drives clients to refer, the personal benefits they gain, and practical strategies financial planners can use to boost referral success.

The Power of Social Proof

Referrals are a natural part of everyday life, whether getting a recommendation from a friend or using a referral code from a favorite influencer. Many of the products and services we love come from referrals, but why are they so effective? The answer lies in psychology. Referral programs work because they tap into key psychological principles, like social proof, which builds trust and drives behavior.

Social proof influences people to follow the actions of others, believing it to be the “correct” behavior. The more we see others engaging in sharing something—a trending song, a returning fashion trend, or a brand referral—the more likely we are to do the same.

Referrals amplify social proof by:

• Building familiarity: When people see and hear others referring your services, it makes your services feel more trusted and popular, encouraging them to follow suit.

• Strengthening group influence: Referrals from friends, family, or coworkers carry even more weight because they come from trusted social circles. People naturally want to be part of a group.

By leveraging social proof, referral programs create a cycle of trust and engagement, encouraging new clients to join. Trust is foundational to a successful referral program.

Because the strength of a referral lies in trust and authenticity, the more trustworthy and credible the person sharing the referral, the more likely others are to trust the recommendation.

Building trust through social proof is perhaps the most significant psychological factor behind referrals, but there are other important motivators to understand.

Key Motivators for Clients Referring Their Financial Advisors

People love sharing positive experiences—it helps build connections with others and boosts their confidence in their own choices. Firms can tap into this by creating referral programs that appeal to logic, emotions, and social connections.

Great referral programs go beyond just being transactional. They often create a sense of connection and make clients feel part of something meaningful. Although earning a referral is not always an exact science, it is made easier when you deliver an exceptional client experience, treat everyone with respect and are a good member of your community. These actions may help in inspiring a wide range of client motivations that may include: 

• Trust and satisfaction: A high confidence level in the advisor’s skills and services can motivate clients to make a referral.

• Alignment of values: Clients may be more likely to refer if they feel the advisor understands their values and goals.

• Personal connection: Clients who have established a deeper, more personal relationship with their advisor may be more motivated to make referrals.

• Trusted resource: Referring a great advisor can help clients establish themselves as a helpful and reliable source of good advice.

• Support for loved ones: Clients often refer because they believe their family, friends, or colleagues could also benefit from the advisor’s services.

Though trust is the cornerstone of client referrals, there are many reasons a client may recommend their planner, including the fact that they may benefit from giving referrals.

Clients Receive Psychological Benefits from Giving Referrals

Many financial professionals may hesitate to ask for client referrals, but their clients also benefit from giving a referral. Here are just a few ways that a client may see psychological benefits from referring their planner:

• Emotional satisfaction: Referring feels rewarding because it provides the joy of helping someone.

• Social bonding: Clients strengthen relationships with the people they refer by being helpful and resourceful.

• Reinforcement of their decision: Referring validates the client’s own choice to work with the planner.

• Reputational benefits: Being seen as knowledgeable or well-connected enhances the referrer’s social standing.

• Participation in a pro-social loop: Both referrer and referee benefit in a pro-social cycle of trust, goodwill, and satisfaction.

One, many, or all of these benefits may be involved for a client to consider a referral.

What You Can Do: Create a Virtuous Loop of Referrals

Because all parties stand to benefit from referrals, financial professionals can create a virtuous loop, or a “win-win-win” situation. A virtuous loop is an opportunity to create a cycle of trust.

This loop can be the core of an effective referral program because everyone involved benefits:

• The referrer gains emotional satisfaction and potentially strengthens their reputation.

• The planner gains a prospective client.

• The referee benefits from receiving high-quality advice and service.

Highlight this virtuous loop when discussing referrals with clients to emphasize the positive outcomes for all parties involved.

Pay It Forward for Long-term Results

As your network expands, and you are helping others beyond just your clients, you will increase the chances that people think of you when they—or someone they know—need financial advice, and you may see a flywheel effect.

Don’t expect immediate results or anything in return. Building relationships takes time and effort, but the trust and goodwill you create in paying it forward will be worth it in the long run.

The fact is the principle of “paying it forward” can be incredibly impactful and often results in others taking interest in you and your work. To inspire this, act intentionally and authentically:

• Connect people: If you know someone who could benefit from a service or product offered by someone else, make the introduction. You’ll be helping both parties, and they will remember.

• Volunteer: Donate your time or resources to a cause that matters to you. Not only will you feel good about giving back, but you’ll also meet others who might need your services or know someone who does.

• Share knowledge: Whether it’s an article, book, or podcast that could be helpful to someone, share it with them. It shows you care about their success and positions you as a valuable resource.

Finally, building a personal and authentic relationship with your clients is key to earning their trust and loyalty. When clients feel that you genuinely care about them, believe in their goals, and are fully invested in supporting them through the process, it creates a deeper connection.

This connection strengthens the client-advisor relationship and makes clients more likely to refer you to others. People are naturally more inclined to recommend someone they trust and feel a personal bond with, especially when they believe you are fully committed to their success.

Financial Psychology Impacts Financial Professionals Too

Whether you want to ask a favorite client for a referral, create a referral program, or utilize a referral program within your sales pipeline, the psychological principles are generally the same.

Keep in mind psychology plays a role on the advisor side too. In fact, some advisors are hesitant to ask for a referral, or worse, they believe that they already get them—even when they do not. This is evident in our recent research on the value of collaborative planning, where we discovered that advisors overestimate the number of referrals they receive with 93 percent saying they receive them, and only 60 percent of clients say they have given one.¹

Referrals help everyone in a virtuous loop, but they rarely happen without a nudge of inspiration. Understanding the psychology behind the referral can help you make that nudge a regular part of your practice.

1  eMoney, “Planning Better Together” Research, October 2024