Advisers questioned reported that family referals from existing clients already account for 22% of all new business referrals on average. One in 10 firms (10%) said such referals account for more than 50% of new business.
According to Investec, changes in taxation rules such as the new pension freedoms are creating a greater need for inter-generational planning, where children are referred to advisers by their parents.
“At a time when legislation such as the pension freedoms reforms are expediting the need for effective cross-generational financial planning and investment management, our research shows just how important clients with family members are to financial advisers, particularly with regards to spouses and children,” said Mark Stevens, head of intermediary services. “There is a clear and natural demand for this continuity but this study underscores just how focused advisers need to be with regards to this key client base.”
Stevens also argued the survey results highlight the importance of advisers working closely with providers. “It is important that intermediaries work with investment partners that understand and appreciate the significance that inter-family investment and financial planning plays with regards to their clients and, therefore, the success of their businesses,” he said.
The main reasons given why family referrals are so prevalent was the strength of existing relationships providing continuity, which 90% of advisers said was the case. Other key reasons were the new pension freedom provisions around inherited assets and the ability to provide inheritance tax planning.
