Generating Referrals From Trusts and Estates Lawyers

In the many studies we have done over the years, the number one concern of life producers has remained consistent–to generate more clients, specifically, more wealthy clients.

Successful producers know that the tried and true way of generating more clients is through referralsboth from clients and from other advisors. In this referral process, trusts and estate lawyers play a critical role. Trusts and estate lawyers make referrals of affluent clients in need of life insurance, and they can facilitate or disenable a life insurance sale.

In many ways, relationships with trusts and estate lawyers are central to a life producers practice. To gain a deeper understanding of their role, as well as what they look for in deciding which producer to refer their wealthy client to, we empirically studied 619 of them.

Trusts and estate lawyers are active referrers to life producers. Out of 10 affluent clients, trusts and estates lawyers will, on average, refer 2.1 of them to producers. These clients have an average estate of $8.1 million (see Exhibit 1). Moreover, trusts and estates lawyer referrals result in business for the producer 3 out of 4 times (73.2%). (See Exhibit 2.)

Life producers are quite correct in targeting their development activities at trusts and estate lawyers, who have affluent clients and are willing to refer them.

But do these referrals stick? Do clients comply with the referral recommendation? The data shows that they do. When trusts and estates lawyers make referrals, affluent clients are inclined to follow their recommendations.

This is an important point. Trusts and estates lawyers are influential in moving private wealth to financial advisors. In just this limited sample of 619 private client lawyers, there is an aggregate client net worth of $13.9 billion, which works out to be an average estate of $10.7 million.

This is not news to life producers, who are already very proactive in calling on trusts and estate lawyers. Most trusts and estate lawyers were approached by six or more producers in the past year (81.1%). And the rest of them were approached by between one and five producers (18.9%). Producers are calling on trusts and estates lawyers to try and capture their share of referrals.

Just how trusts and estate lawyers choose which producers to refer to and work with is encapsulated in the Advisor Selection Hierarchy TM. Understanding this hierarchy will help producers work more effectively with lawyers. They will be able to position themselves more effectively and they will also provide value in a manner that translates into significant wealthy referrals.

The Advisor Selection Hierarchy is a framework created to help producers better understand how trusts and estate lawyers think when selecting producers to whom they are willing to refer their wealthy clients. The more insight a producer has into a lawyers thought process, the more effective he can be in garnering referrals.

In the ASH, there are four constellations of criteria. They can be thought of as four levels of a hierarchy as organized by significance. The four levels are:

–Level I: Foundation Criteria.

–Level II: Collaborative Criteria.

–Level III: Financial Criteria.

–Level IV: Legal Practice Management Criteria.

The criteria of Level I include the “absolute givens” or “must haves” of any producer to whom trusts and estates lawyers are willing to make a referral. Because these are the essentials, any producer who is not able to meet these criteria is immediately placed in the “avoid at all costs” category.

Elements of Level I include personal integrity and technical expertise. Unfortunately, these are not givens. Lawyers cannot assume that all producers who they meet will share their ethical standards or bring the requisite technical expertise. Producers should be mindful that they will have to take care to position themselves on these dimensions and communicate these qualities clearly to the trusts and estates lawyer.

Level II in the ASH, Collaborative Criteria, refers to the many ways a producer must work effectively with a trusts and estates lawyer. Regardless of his professional skills, if a producer is unable to be a team player in the way needed by the lawyer, then that producer is similarly placed in the “avoid at all costs” category.

Paying attention to Collaborative Criteria means a producer ensures that the trusts and estates lawyer is always appropriately involved. This also means that the producer openly exchanges information and ideas.

Our research confirms that greater success goes to those producers who systematically establish processes that create a highly collaborative environment between themselves and trusts and estates lawyers.

In order to ensure their wealthy clients are provided with the best possible advice and service, lawyers deem these two sets of criteria essential. These two levels define professionalism, according to the trusts and estates lawyer. Level I: Foundation Criteria centers on the wealthy client, while Level II: Collaborative Criteria centers on the trusts and estates lawyer himself.

Producers who make it past the first two levels are now subjected to even closer scrutiny by trusts and estates lawyers before a referral is made. Now, these lawyers are looking for established producers who are in a position to create value in return for the referral. Because quite a few advisors are capable of meeting Levels I and II, it is in Levels III and IV that the differentiation is made. These levels constitute the financial incentives for the trusts and estates lawyer; they provide economic glue between the lawyer and the producer.

Levels III and IV exhibit more diversity of private client lawyer needs and more diversity in what producers have to offer. Here, the question is: “Which producers can add real value?” When trusts and estates lawyers think of real value, they are thinking of value in financial terms. There are direct and indirect ways for producers to do this.

Providing direct financial rewards is what is involved in Level III: Financial Criteria.

Financial Criteria refer to direct financial reciprocity for referrals, or other participation in client-based revenues. (At the current time, not all trusts and estates lawyers are in a position to participate in these, but all producers should be aware of how they are working in some areas).

The point for producers to understand is that trusts and estates lawyers are well aware of the value of their referral to a producer, and they want to have a return of equal value in some way.

The final criterion is Level IV: Legal Practice Management Criteria. This includes all the options for indirect value-added directed toward the trusts and estates lawyer. Level IV is a very important factor lawyers use to select producers. Lawyers seek significant indirect value-added through practice management support. This factor includes the information, insights and experience that producers can provide to a lawyer and legal practice.

Level IV provides another form of economic glue between the trusts and estates lawyer and the producer.

This is an interesting and powerful area, because it is one in which these lawyers can easily and effectively discriminate among producers. Some producers are very good in this area and can provide real value-added to the lawyers who work with them. Others are weak in this area, and do not represent good choices in partnering. When this works well, it results in a stronger bond between the producer and the trusts and estates lawyer. Even more importantly, it enables everyone to better serve the affluent client.

Win-win outcomes are a clich?, but when they do work, they work spectacularly well. Producers and trusts and estates lawyers have an opportunity to achieve win-win relationships when it comes to client referrals.

Producers aware of the Advisor Selection Hierarchy TM will seek to provide even higher levels of value to trusts and estate lawyers, who will recognize that value with a larger and larger stream of referrals.

In effect, when properly implemented the Advisor Selection Hierarchy TM results in a pipeline of new wealthy clients. The meaningfully large referral stream will create incentives for the producers to focus even more on providing value to the lawyer and so it goes.

As always, a win-win outcome requires a great deal of attention on the needs of the other participant in the exchange as they are (not as one would like them to be). A framework such as the Advisor Selection Hierarchy TM is useful because it directs the attention of producers to what trusts and estates lawyers are seeking in exchange for those referrals.

Russ Alan Prince is principal of Prince & Associates, a research and consulting firm in Shelton, Conn. He can be reached via e-mail at princeasoc@aol.com. Arthur Bavelas is president and CEO of Resource Network LTD, Radnor, Pa. He can be reached at aabavelas@aol.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 16, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.