When consultant Libby Dubick wrote a column recently on getting referrals from certified public accountants, she was deluged with calls and e-mail from frustrated financial advisors.
Their question to her: “Do you have the answer?”
Not surprisingly, given the caliber of CPA referrals, a lot of advisors are eager to form alliances with accountants. The sad truth: Most don’t have the staying power to make the relationship work.
As Dubick, a New York City financial services consultant, puts it: “They’re on two different planets. Everything about them is kind of oil and water. I don’t have the silver bullet. I don’t think there is one.”
It’s a disconnect that presents a huge challenge for advisors who want access to wealthy clients — and their gatekeeper, often the CPA.
In fact, new research from CEG Worldwide shows that the most successful financial advisors — those with the highest income and a small base of 150 or fewer clients — use referrals from other professionals (53 percent) and joint ventures (23.8 percent) far more often than do other groups.
And a recent Cerulli Associates survey of registered investment advisors turned up a common characteristic of growing and successful practices: the development of a repeatable referral source.
“In some cases, it might be the human resources department of growing companies or an estate planning lawyer, but in a lot of cases it’s the CPA,” according to Bing Waldert, associate director of Cerulli. “They can deliver a higher-end client. A client seeking out that level of tax advice is going to have significant assets and he’s going to have a more complex financial situation. By definition, that client is going to be in need of assistance.”
No one is closer to the issue than Daryl Logullo, author of “How to Grab CPA Referrals by the Dozens” and founder of Strategic Impact, a consulting firm in Vero Beach, Fla.
Typically, when Logullo asks advisors how many of them have relationships with CPAs, as many as 30 percent to 40 percent will say that they do. When he digs deeper — Are the relationships productive? Do they generate conversations and dollars? — that number, he says, is “really, really low.”
Part of the problem is the culture gap that exists between the CPA and the financial advisor. They have little in common when it comes to two of the basics: their business model and how they are paid. And even if they do develop a relationship, it can take months, even years, to yield results.
Chip Roame, managing principal of Tiburon Strategic Advisors, says most advisors lack the doggedness that the relationship-building requires.
“In my opinion, this is a stagnant space,” according to Roame. “Advisors, in all honesty, lack the tenacity as a group for building CPA alliances. You see a lot of quick starts: a seminar, a mailing. But I don’t see much tenacity. If you really want to work with CPA firms over time, you have to ride the relationship.”
The good news: When it does work, the results can be astonishing.
CEG Worldwide founder John Bowen currently has 300 advisors in coaching programs and 40 are developing CPA alliances — raising billions of dollars in the process.
“What we’re seeing is that when it works, it’s unbelievably successful. But what happens is CPAs by their very nature are skeptical and a lot of them have moved from being skeptical to cynical. Because of that, we’re finding they’re taking even longer to get ready,” says Bowen. “Unless you have an extremely compelling value proposition, you fail. The thing is you can make this work. When we look at advisors netting over $1 million a year, on average they have five strategic alliances. If you’re going to be successful on purpose, this is one of the elements you need.”
Building BlocksWhat do CPAs want? The answer might surprise.
As Logullo frames it, “Every CPA wants this: They want to move away from tax counselor to comprehensive business advisor. They want to be re-branded. They want to be involved in all aspects of a client’s life. And herein lies the problem. They don’t know how to do that. Who does? The financial advisor.”
According to Logullo’s research, CPAs greatly admire the way financial advisors bond with their clients and become involved in their lives and life choices.
“It’s something CPAs want to do more of. They tell me over and over again if we had that form of bond, we would be absolutely remarkable at what we do. Yet when you talk to financial advisors, they think CPAs don’t want to have anything to do with them,” Logullo says. “There are ways to take that first step.”
Among the strategies to consider:Be patient. Understand that these relationships are built over time, on the CPA’s schedule and not the advisor’s. “I think advisors often run out of steam, but yes, it can be done. You have to show up repeatedly,” notes Dubick. “It requires a lot of handholding.”
Think like a CPA. A lot of advisors mistakenly focus on how to create revenue sharing for the CPA, according to Dubick. “That’s not what they care about. They don’t mind if the FA makes money, but what they really care about is making their job easier or serving the client better,” she says. “That’s what they really want.”
Unlike the financial advisor, a top concern of CPAs is liability. Talk to them about it. “Empathize,” advises Logullo. “Advisors can talk about what it was like in the 1970s when limited partnerships went in the toilet, or more recently, the fallout from the mutual fund scandal. Show that you understand what they are concerned about.”
Involve the CPA in your work. Figure out how to let the CPA experience your work. As an example, suggest to a client that you meet together with the CPA to share thoughts and exchange ideas. “The CPA is going to fall over, of course,” Logullo says. “And it’s a simple step you can take to show off your experience.”
Other tactics: Invite the CPA to sit in on an investment policy committee meeting. Ask the CPA for input on a client proposal. “The biggest problem financial advisors say they have is differentiation,” he adds. “You’ve never gotten them inside your well. This does that.”
Create economic glue. The relationship doesn’t have to be about fees or revenue-sharing. Among the options here: providing a full-time assistant to support the relationship and allocating funds to market the partnership. “CPAs tell me over and over it’s not about revenue,” says Logullo. “They’re not motivated by financial issues. They’re motivated to do the right thing.”
Best PracticesOne need look no further than Justin Hardesty, a Raymond James Financial Services advisor, to see best practices at work.
Hardesty’s firm, Greenport Financial Advisers in North Canton, Ohio, has 120 client relationships. Over the last 10 years, Greenport Financial, with three advisors, has developed alliances with a dozen CPAs in the region.
“Oftentimes in someone’s life, the first advisor a person gets is a tax person, followed by legal counsel. It’s not unusual for the financial advisor to be the last one to come into the fold,” according to Hardesty. “We recognized early on that we needed to know who the CPAs are and that we needed to be referred into situations.”
Greenport Financial has grown exclusively through referrals, mostly from “trusted advisors” in the community.