‘One or Two Strategic Partners Can Make Your Career’: How RIAs Can Intelligently Gain Referrals

Local networks of professionals offers a vast reservoir of new client leads.

(Illustration by RIA Intel)

(Illustration by RIA Intel)

For many advisors, a happy client can become a great source of referrals. But the random and slow nature of those professional introductions hardly makes for a marketing strategy. Moreover, many advisors are simply uncomfortable asking clients to sing their praises. It feels unseemly.

A far more proactive approach is to build bridges to the Centers of Influence (COI) in your area. Accountants, lawyers, insurance brokers, real estate agents, and other professionals already work with the very same people that you are hoping to find.

The trouble is that the road to COI referrals is paved with land mines. Those COIs “can see you coming a mile away,” says Bill Bachrach, a San Diego-based financial services thought-leader and coach. Lisa Salvi, vice president of business consulting and education at Schwab Advisor Services adds that “to break through to COIs, you’ll really need to stand out.”

“Frankly, reaching out and telling them you are hoping to get referrals is an obnoxious approach,” says Bachrach, as you are showing little actual interest in their business and values. When advisors are so direct and transparent in such efforts, “it’s sort of like, hey, I don’t want to go on a date with you. But won’t you introduce me to your sister?”

Instead, it’s best to court COIs in a slow and steady manner. “Offer to take them to a nearby lunch spot, and start the process of getting acquainted,” recommends Brett Van Bortel, director of consulting services for Invesco US, and author of RainMaker: Strategic Partnering with Attorneys and Accountants to Create a Pipeline of New Affluent Clients.

He says that advisors should then patiently get to know more about the COI and their client approach. “You want to establish ‘economic glue’ with them, learning how they are aiming to grow their business and how you can help them meet their goals,” he adds.

Salvi says advisors need to be prepared for a series of ongoing conversations until efforts bear fruit. “It can take more than a year to generate your first referral.”

Build just a few of these durable long-term relationships, and over time the spigot of client referrals may become a fire hose. “One or two strategic partners can make your career,” says Van Bortel.

It’s not enough to simply make a series of connections with various COIs. “Unless they occur repeatedly from one professional, chances are you have an “affiliation,” rather than a “strategic partnership,” writes Van Bortel in his book. To elevate the connection, they need to “engage in the intensity of relationship management that they would with a top advisory client.”

His research has also shown that highly successful advisors rarely have more than three or four strategic partners. Build more than that, and it is too difficult to effectively manage the relationships at a strategic partnership level. Advisors soon learn that they cannot “feed all of these “strategic partnerships” adequately and began to backslide into ‘affiliations,’” notes Van Bortel.

Of course, finding those future strategic partners isn’t easy. Van Bortel suggests that advisors embrace a methodical approach to locate ideal potential COI targets. Obvious candidates include those that work nearby and are of similar age and experience. A 55-year old advisor may not hold a great deal of interest to a 30-year old CPA when it comes to building long-term connections and vice-versa. “Birds of a feather flock together,” says Van Bortel.

The next group on your list should be the professionals that your existing clients work with. You’ll start to see some names frequently come up when you are looking at prepared tax returns or estate planning documents.

Not all of them will be good candidates for referral-building relationships. Many estate planners, for example, work with high-net-worth clients, which may not be your target audience. And some CPAs are now trying to morph into full-scope financial planners. So there is no need to invest time and energy with someone that’s never going to send business your way.

“If you’re investing the time and energy to patiently build the right COI relationships, then you need to be sure in advance that they will really be the right fit for you,” says Salvi. Conversely, you’ll need to be a good fit for them as well. “Some COIs don’t know the difference between a broker and an RIA…help them understand how your values are aligned,” she suggests.

Industry experts also caution against efforts at horse-trading. Not only is it unethical to expose your client list to others, it’s also “very rare to see the flow of clients happening in both directions,” says Van Bortel. “An advisor can refer 20 clients to an estate attorney and never get one back,” he notes.

Bachrach tells his advisor clients to put themselves in the shoes of the COI. He cites an example of a CPA that is asked if they are looking for an advisor to help their clients with financial planning. “Try to make that CPA your client, show them the care and depth that you provide in your planning process,” says Bachrach.

“And as I’m going through your process, I’m discovering, you’re a good communicator,” he says, adding that “it’s experiential, not just technical. I’m enjoying the experience of working with you.” Bachrach says that such efforts show “you’re actually good at what you do, your client value promise is comprehensive,” which demonstrates first-hand the kind of care their clients will receive.

“If I’m the COI and I am impressed with your work, then I can really stand by the referral to the client,” he says. The opening pitch is quite simple. “I want you to experience my process for yourself.”

You can also create a strong first impression by focusing on your clients’ needs. Bachrach suggests opening a conversation with “I’m calling because we have a mutual client. And it’s important that we work effectively together for their benefit.”

In his lectures, Van Bortel distills the COI bridge-building to a simple notion. The best advisors “turn 180 degrees, from an approach of, ‘let me tell you about me’ to ‘what can I do for you?’” It’s a process he calls “You & I incorporated.”

It’s not just a hollow bromide but a template for collaborative action. As just one example, an attorney that helps clients lay out their asset titling strategies can likely use help in strategic investment planning in areas such as annuities, concentrated stock positions, charitable gifting strategies, and more. Demonstrate your expertise in these areas, and the attorney will have greater confidence that you’re a fellow problem-solver.

Advisors may also want to consider another group of professionals: other advisors. A growing number of advisors offer fee-only planning yet without asset management services. Diane Pearson, a Wexford, PA-based financial planner connects with her colleagues in her region (and on her professional networks) to become an option for client leads that just want financial planning without strings attached.

She’s focused on a larger pool of potential clients than many advisors realize. “If a client has a $150,000 portfolio, a lot of advisors simply won’t touch them,” she says. The appeal to asset-managing advisors should be self-evident. Advisors like Pearson can become a source of referrals to them when clients do need to have their assets managed.

Pearson stresses the need for key industry designations and memberships. She maintains a regular dialogue with members of the Financial Planning Association (FPA), the National Association of Personal Financial Advisors (NAPFA), is a Certified Divorce Financial Analyst (CDFA) and a Professional Plan Consultant (PPC). That means she’s ostensibly connected to hundreds of her peers.

Developing a stream of referrals from COIs can be painstaking and there are no short-cuts. “A lot of advisors tend to rush this process,” says Salvi. And that can lead to conversations that go nowhere. Which is why so many advisors can’t be bothered to invest the time and energy in the first place. Yet the fruits of such labor can help turn a moribund practice into a thriving one.

David Sterman, CFP, is President of New Paltz, NY-based Huguenot Financial Planning

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