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Advisor Referral Programs

Advisor Referral Programs

Advisor Referral Programs

RIAs can benefit by forming constructive relationships with custodian retail branches through formal referral programs, specifically TD’s AdvisorDirect, Schwab’s Advisor Network and Fidelity’s Wealth Advisor Solutions.

When done right, the ability to build and execute a sales strategy around one or a combination of these programs can ignite asset gathering. But one of the great misconceptions about referrals is that they do not require any commitment of time, manpower and other resources. A referral is merely an introduction; it doesn’t assure that you’ll capture the account any more than a blind date assures marriage.

If you’re going to leverage these programs to gain referrals, you need to be prepared to receive them. Having a commitment to growth, a detailed plan, and the ability to execute the plan are the first pieces of the puzzle toward achieving increased AUM within these platforms. The next steps are putting the proper resources to work; both out in the field and back at the home office.


Getting the personnel in place to support a sales strategy is key to maximizing the referral opportunity. Strategically hiring sales people in target markets around the country is one way to add capacity. But firms can’t forget to staff on the front lines. If the phone is ringing and there’s no one there to answer it, it’s a missed opportunity.

One firm we know made its commitment to a program before entering it by building out its sales force, client servicing and operational capacities. It then hired a sales manager that sought out proven sales talent to staff the different geographical regions across the nation, rebranded the firm and developed a compelling sales message based on the firm’s history and investment style. As a result of these efforts, when the firm entered the program it grew its AUM by over 125% over a two-year period.

Salespeople need to focus on maximizing the referrals out of each branch they are assigned to – and that’s a full-time job. Firms that fail to achieve the growth they’re aiming for fail to differentiate roles within the firm. For instance, some have the same person who does the investing also seeking out referrals. It just doesn’t work! Aside from sending a mixed message to the prospective client, a skilled portfolio manager may be dreadful at closing a deal and vice versa.

Form strategic relationships

A small firm with a distinctive value proposition can broaden its footprint by forming a strategic relationship with a larger firm. We saw this work for a firm that offered a unique investment strategy but lacked the sales staff to distribute it beyond its local market. By establishing a solicitation agreement with a custodian that had a national sales force and access to an entire branch network they were able to double their AUM within one year. The custodian involved in the process saw it as an opportunity for the firm’s strategy to be accessible throughout the branch network thus benefitting its client base.


Referral programs have become more competitive over the last 10 years. As the number of RIA firms in the marketplace continues to grow we expect the bar to continue to rise regarding the requirements necessary for admittance. Although some believe these programs have matured and don’t bother pursuing them, we believe the opportunity is still rich for firms with creative strategies in markets that are not overly saturated.

To enter their referral programs, the big-three custodians require that RIAs provide fee-based compensation, have a minimum level of education and investment experience, a minimum amount of assets under management and the proper state and federal licensing.

Beyond these basic requirements, they are looking for investment disciplines that will fill the gaps in different geographical areas. Each potential entrant is considered on a case-by-case basis and none of the programs publish a set minimum asset commitment.

In addition to meeting program requirements, advisors pay fees to participate in TD Ameritrade’s AdvisorDirect program and Schwab’s Advisor Network. We believe participation fees are a small price to pay for the access to the branches and the ability to attract pre-screened, qualified referrals.

Delivering the message

An RIA’s work doesn’t end once a firm has been granted access to a platform – it still remains competitive within the program to receive referrals; they don’t just start pouring in. Having a unique story to tell is critical in differentiating a firm from others on the platform. Although not mandatory, providing a competitive GIPS-compliant track record can also help demonstrate a firm’s track record of producing favorable results for their clients.

The most important aspect to hatching a successful strategy within these referral networks is to have a well-trained sales team that can deliver a consistent and compelling message to the branch network on a daily basis to attain referrals and, in turn, convert them into new clients for the advisory firm.

About The Author

Paul Tracey


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