In today's synergy-centric world, smart financial advisors and attorneys are finding joint business development a path not only to cross-referrals but to heightened value for their clients.
At a time when investors’ financial needs have become more complex, private attorneys — such as specialists in estates and trusts, especially, as well as in family/divorce, taxes and elder care — are an important component of many FAs’ networks and in some instances, even considered part of their team.
What's in it for lawyers? These relationships tap into a rich vein of new clients: FA referrals net attorneys seven out of 10 clients, according to Jonathan Powell, senior managing principal at CEG Worldwide, a coaching firm for top financial advisors, which is headquartered in San Martin, California.
Wirehouses, in particular, with multi-FA offices composed of as many as 20 to 50 advisors, can be potent sources of these referrals.
“Word quickly spreads. So it's easier to get more referrals coming from more people quickly. And if the branch manager takes the lead, it can expand even quicker,” says Powell, who prior to joining CEG, managed Shearson/Smith Barney branches, then led Citibank's West Coast brokerage business.
All but a handful of states prohibit lawyers from sharing revenue with non-lawyers, so informal strategic relationships with FAs, rather than formal alliances, are most common. However, advisors and attorneys can join forces to help one another acquire new clients in several ways that harmonize with lawyers’ professional rules of conduct.
“This is the model of the future for quality estate attorneys and top-notch financial advisors, rather than ‘Let's just trade referrals back and forth from our existing client bases’,” says Vaughan Scott, senior vice president-investment officer of Axiom Financial Strategies Group of Wells Fargo Advisors, in New Albany, Indiana.
For instance, Scott may ask a high-level local attorney whom he knows to review a prospective client's estate plan and furnish a critique. In such arrangements, lawyers invest their time at no charge with a view toward developing their own relationships with clients.
It's inadvisable, however, for an attorney to accompany an FA to meet with prospects since this could be construed as a possible fee-sharing arrangement.
“There's a fine line between creating opportunities for one another and, on the other hand, being together on the deal,” says Micah Buchdahl, an attorney who has a law marketing consultancy, HTMLawyers, based in Moorestown, New Jersey.
One way to generate those opportunities is to co-write print and online articles for legal publications, reprints of which can be used by both advisor and lawyer to market their practices.
“Financial services folks and law firms are getting together to offer up opinion and how-to articles. They’re splitting costs; so this can be very cost-effective,” notes Buchdahl.
Wirehouses encourage their FAs to form relationships with attorneys; and they’re putting muscle behind this by, for example, sponsoring American Bar Association continuing education programs. Bank of America Private Wealth Management paid for a large sponsorship of at least one such event with the objective of generating leads, recalls Buchdahl, who was in attendance.
These and other efforts are working well for Bank of America Merrill Lynch financial advisors, who “absolutely form relationships with attorneys — and they’re probably quite prolific,” according to Sam Gottesman, managing director and market executive-Mid Atlantic, with U.S. Trust, Bank of America Private Wealth Management and based in Washington, D.C.
Further, the big firms are holding their own events for attorneys and other centers of influence. Calling attention to its wide array of services, Wells Fargo Advisors offers “VIP Trips” to St. Louis headquarters, where the BD serves up four to 10 meetings with experts discussing WFA's range of resources.
“The firm makes it very easy to cultivate attorney relationships,” says Neil Weissman, financial advisor and managing director-investments at Wells Fargo Advisors, in Ann Arbor Michigan. “When you show them the capacity of the firm, that further advances the attorney's confidence in your ability to perform.”
Advisors with wirehouses are also sponsoring local Bar Association events on their own and placing ads in legal-industry publications to generate name-awareness. Likewise, law firms fund events and advertise in financial publications to connect with FAs.
Every year Weissman holds four to six client-and-prospect events. His presentations include an attorney and a CPA, who are at the ready to respond to audience questions.
“Having those experts with me adds value to the relationships that we have with clients,” Weissman says.
The all-important foundation for building a successful advisor-attorney understanding is trust.
From the attorney's perspective, “particularly dealing in the high-wealth corridors, the cost of getting it wrong is relatively high from a reputational standpoint, as well as a practical one,” Gottesman notes.
Chemistry is also a major element as to whether or not a relationship works.
“Personality is huge. At the end of the day, people do business with people they like,” Gottesman observes.
Focusing on a similar clientele is another critical component.
“It's important that you’re clear about the attorney's ideal client — and the types of clients they don't want,” Powell says. “Look at your book realistically to see: ‘Do we have an overlap?’”
Attorneys and advisors need to be on the same page, too, in their approach to doing business.
“It's critical that both parties are aligned so that whatever one is trying to accomplish isn't being hindered by the other,” Buchdahl says. “That will benefit the client because if the attorney is constantly altering documents put forth by the financial advisor, those billable hours add up.”
Gainful relationships — of any sort — are achieved only when both sides’ “true needs” are addressed, says Raphael Lapin, a Harvard-trained negotiation and communication specialist, and founder-principal of Lapin Negotiation Strategies, based in Los Angeles.
“The attorney's true need, especially for younger lawyers, is to generate billable hours — and they’re under incredible pressure to do so,” Lapin says. At the same time, wirehouse advisors are compelled to hit production goals and, typically, to sell specific product.
But in recognizing these respective needs, “the advisor and attorney must never eclipse the ultimate goal of providing high-quality service to the client,” Lapin stresses.
Distinguishing oneself from other advisors through specialization is a big plus to stimulate attorneys’ interest and enhance the FA's standing as a fertile source of referrals. This is true for both wirehouses and independent advisors.
“If you’re inside a major firm, you have to differentiate yourself so you’re not like everyone else. Again, you need to be very clear about who you serve and who you don't serve. That makes it easier for the attorney to find a match when an opportunity arises,” Powell says. “Advisors with the greatest success working with legal professionals have a well-defined client niche, which makes it easier to think of them first.”
Many such FAs who speak at conventions of professionals working in their specialty often take a lawyer with them to discuss legal aspects of attendees’ unique wealth management issues.
“When there are 70 to 100 pre-qualified people in front of you, do you think an attorney might find a new client? You bet,” Powell remarks.
For many advisors, connecting with lawyers directly through their clients has proven most effective. For example, as part of her onboarding process, Marcia Person, financial advisor and first vice president-investments with Raymond James in St. Petersburg, Florida, simply asks for the name of the client's attorney and requests permission to contact them to introduce herself.
“I tell clients that in my holistic approach, there will be times when they’ll want their attorney and me to work together. So if we already know each other, it will make it easier for them in the future,” Person says.
Earning professional certifications is another way that helps advisors liaise with lawyers. When Person, for instance, acquired the certified divorce financial analyst designation four years ago, she joined the St. Petersburg Bar Association and found a fresh route to local attorneys.
Person also advertises in the association's monthly print and electronic magazine. That has generated calls from lawyers wanting to meet with her to learn about the CDFA designation and how they can tap into her services.
It's no surprise that competition among FAs for attorney attention is heavy. Therefore, to help maintain existing relationships, conscientious advisors make sure to stay on lawyers’ radar screens.
“I see our centers of influence, including attorneys, twice a year. We sit down over dinner or lunch to talk about our relationships — what's working and where we can improve,” Weissman shares.
Or course, there's no rule that a lawyer with whom a financial advisor works on client accounts can't also be the FA's client. And this is frequently the case. But clients should be apprised.
“It's important that these relationships are disclosed. This isn't a bad thing, though, because if the attorney has confidence in you to be your client, it reflects positively,” Scott notes.
Indeed, U.S. Trust is specifically targeting attorneys as clients. “We have the beginnings of a legally focused practice,” Gottesman says.
In fact, last year U.S. Trust, which employs both trust officers as fiduciaries and private client managers that are registered advisors, hired legal specialist Brent Smith, previously head of Citibank's Law Firm Group.
“Traditionally, Citibank has been viewed as the firm that made the greatest inroads into the legal community because they designed [the group] to be a stand-alone business within wealth management,” Gottesman notes.
Nurturing advisor-attorney relationships takes time and patience. Often this can be a stumbling block.
“The FA is looking for quick results, but the attorney is in absolutely no rush,” says Henry Montag, principal of the TOLI Center East, which evaluates private trustees and is based in Jericho, New York.
“An attorney is interested in protecting their relationships with clients and will refer one only after they’ve gotten to know the FA and built a relationship,” Montag adds. “So they may often wait for the first referral to come from the FA before they’re willing to open their clientele to the advisor.”
To be sure, a big concern of lawyers is reputational risk: What if the FA blows up their client's portfolio?
Here are two ways that are likely not effective in building bridges to attorneys, according to the experts: Cold calling and making contact through LinkedIn.
“I get calls from financial advisors who see me on LinkedIn,” says Buchdahl, a practicing ethics attorney. “But if I don't know who they are, I won't take a meeting with them. There's got to be some awareness. That's where marketing and advertising can come in because they make an advisor's existence known to the legal profession.”
Fruitful bonds with attorneys can originate in myriad other ways, though.
“You’ve got to meet people,” says Lapin, who helps both financial advisors and attorneys develop high-value relationships. “Invite lawyers to coffee or for a drink after work. Tell them: ‘I think there may be a mutually beneficial relationship we could establish.’ But all this takes time, persistence and patience. That's what's needed for any sort of lasting relationship.”