Imagine never having to cold call to find new clients. Imagine putting an end to marketing seminars and direct mail campaigns. Imagine having clients so loyal, so pleased with your work that they happily refer you to family, friends and business associates without you even having to ask.

For many advisors, this dream of a referral-only business has become a reality. Here, seasoned veterans share their insights on developing a client acquisition model where referrals are a common byproduct of trusted, long-term relationships.

Doing Away with Tradition

A dirty little secret of the financial services industry is that more than half of the clients at the larger financial firms are assigned to senior advisors, says Mitch Kramer, principal of Fluent Financial in Dallas.

The reason? First year advisors have a high failure rate, and their employers don't want to lose the assets they brought into the firm.

"They get their friends and family to…open accounts, and if they don't make it, the big wirehouses will do anything in their power to keep those assets on the books," explains Kramer. The Catch-22 is that the senior advisors who inherit these clients rely on the reassignment coordinator for all of their marketing, rather than developing a good referral network, he says.

Kramer spent his first nine years in the industry at American Express Financial Advisors (now known as Ameriprise) before venturing out on his own in 2005 with LPL as his broker/dealer. "I built my practice basically referral-only from my second year on," he says.

Sounds simple enough, but developing a practice that grows on referrals alone is no mean feat. If you're considering this model, the following six strategies can help you achieve your vision.

1) Make a Gentleman's Agreement.

Jim Relyea learned the art of asking for referrals early in his career while working in the life insurance business with Connecticut General.

"An integral part of the CG process was to 'serve first,' which included entering into an informal gentleman's agreement with the prospective client," explains Relyea, a founding member of Relyea Zuckerberg Hanson, LLC, part of Commonwealth Financial Network. Under the "agreement," Relyea offered to help clients with their estate planning if the clients in turn agreed that, should they choose to buy life insurance as a result of his plan, they would buy it through him. Likewise, if they were happy with the work he did and his low-pressure advisory style, they would, as a goodwill gesture, refer him to others whom he would contact on an informal basis.

"I'll give you the best possible service if, in return, you will help me meet some good people that you feel might benefit from this work," says Relyea. "The whole basis of the gentleman's agreement is accountability."

Relyea also showed clients how providing him referrals would improve the quality of service they received. He explains, "If you are able to introduce me to good people, I won't have to spend my time cold calling. Therefore, I can spend 90 percent of my time working for you rather than trying to get new people." Under this approach, advisors earn the right to be referred and never take either clients or referrals for granted, he notes.

"You keep building relationships and creating good will," says Relyea.

2) Team up with Others.

Relyea went on to earn his CFP designation, and in 2000, joined forces with planners Carl Zuckerberg and Dana Hanson with a shared vision of working as a team with every client. This same approach has led to the continued success of their referral process.

"In our [business] model…clients are clients of the firm, and referrals are referrals of the firm," explains Relyea. "We all share in the responsibility and the activity of finding new people and getting referrals."

Neal Van Zutphen, Vice President of Delta Ventures Financial Counsel, Inc., also chose the team approach to support the continued growth of his business through referrals. After working with a fee-for-service consultancy, Van Zutphen went independent in 1994, and five years later was managing more than $10 million in assets. Most of his revenue came from financial planning and retainer fees to support the financial plans.

"As my assets grew, time to do plans declined and the revenue mix flipped," explains Van Zutphen. "Instead of 80 percent planning fees, 20 percent advisory fees, it became 80 percent advisory fees, 20 percent planning fees."