Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Practice Management > Building Your Business

The positive power of alliances

Your article was successfully shared with the contacts you provided.

As the erratic financial markets continue to consume the investing public’s attention, it becomes especially important for advisors to use innovative ways to build their businesses. Advisors may not recognize that the ever-evolving world of personal finance regularly presents new demands on advisors who must steadily enhance their value in the eyes of clients.

For starters, in addition to being able to provide solutions to such traditional challenges as income generation and capital preservation, today’s senior advisor needs to apply strategies for tax-minimization, international investing, alternative investments, estate planning, college funding and long term care to name a few. Adapting to this continuously expanding environment may require senior advisors to build alliances with a wide range of professionals who can help them meet this seemingly constantly growing list of client objectives.

The good news is that reaching out to other professionals generally helps create a stable and thriving business that can benefit client and advisor.

“Professional alliances should be formed for one reason only,” says Craig Hyldahl, CFP and Certified Divorce Financial Analyst with R.I.C.H. Planning Group, LLC in Woodbridge, N.J. “To satisfy client relationships.”

“Advisors should build their professional referral networks by thinking about how other professionals could add value to their clients,” agrees Dave Welling, vice president of advisor practice management at Schwab Institutional Services in San Francisco.

“It should not be about how you can get the most referrals from other professionals. A common pitfall is advisors thinking of networks as reciprocal relationships where clients are exchanged like a currency.”

According to information supplied from Schwab’s RIA Benchmarking Growth Trends Study (2007), 36 percent of new advisor clients come from referrals from other professionals and business partners making it the second- strongest source of new clients behind actual client referrals. This indicates that the ability to build relationships with other professionals is a critical success factor for advisors.

“Advisors are often frustrated by building networks of professionals,” adds Welling. “The reality is, just like any other relationship, it takes years to build a mutually trusting business relationship.”

Today’s playing field
Like many services, today’s thriving financial-advisory business has become more relationship-driven. A key reason behind this wave is the proliferation of personal-finance information. The Internet and cable television have made information one of the most common commodities and this has leveled the price-playing field for nearly every product. Not only do clients today frequently check the various ways in which they can save money with their retirement planning, many now expect this type of treatment from their sales representatives. In this price-driven business, service and the relationships they foster are the keys to long-lasting success. While clients and prospects may present you with rock-bottom prices, challenging you to match them, planning a financial future is not the same as buying a used car. By probing deeper into a client relationship, the senior advisor can unearth substantive issues and help the client better prepare for them, often pointing the way to a trusted professional in the process– but even this approach has its caveats.

“Before referring a client to an accountant for example,” says Matthew Tuttle, CFP with Private Client Group, LLC in Stamford, Conn., “the advisor needs to know the accountant’s practice as well. Is he the right accountant for this client? An advisor cannot approach this with a ‘what-can-you-do-for-me?’ attitude.”

“The first couple of meetings should be about understanding the other’s business,” advises Welling, who notes that insurance brokers, real estate agents and mortgage professionals should be members of your inner circle.

And while accountants, lawyers and estate-planning specialists are generally first in line, building a stable of powerful alliances requires an investment of time and in some cases money. But don’t think of the initial investment instead consider the possible return.

Building alliances means working with others to create opportunities. Someone with an idea or need can call a friend, associate, vendor or neighbor and receive access to a world of resources. It can take place in a business or social setting and can be spontaneous or part of a longer, deliberate process. In any case, it removes obstacles and creates business-growth opportunities by cultivating professional connections.

Almost every relationship has the potential to offer ways to help grow one’s business. Do not hesitate to ask those professionals with whom you already have a relationship to recommend others. If you are going to recommend someone to a client there must be a level of conviction on your part. There’s a very good chance that an accountant or bank officer will know good estate-planning professionals. Real estate professionals generally know who the good mortgage providers are in their community.

“When we are referred by a divorce attorney or accountant we always go with that professional on the first client meeting,” says Tuttle. “We’re around the table with the client and each party is actively involved.”

While groups like a Chamber of Commerce are helpful, it may pay to aim for qualified organizations and centers-of-influence. Serving on boards can lead to key introductions. Participating in study groups and a variety of other networking groups can also provide exposure with qualified professionals.

The advisor as quarterback
“The more specialists you know the better,” says Hyldahl. “Aim for collaborative relationships with various levels of expertise to satisfy client relationships. When the client wins, it’s good for everyone.”

Hyldahl includes CPAs, lawyers, property-and-casualty advisors, mortgage planners and mental health professionals in his business alliances. In his divorce-analyst work he regularly operates side-by-side with lawyers to help ensure equitable settlements. He built his network over several years mostly by holding lunch-and-learn meetings to which he’d invite relevant attorneys. Often an outside speaker was featured.

“This proved to be a great way to meet key specialists in a professional but friendly setting,” he recalls. Hyldahl is also proactive in other ways within his networking. When conducting financial reviews he’ll look for opportunities to help grow relationships. “I’ll ask a client if he has a will. If not, I know to whom to refer him.” Similarly when Hyldahl sees a situation where refinancing may be in order, he’ll recommend a mortgage professional.

When year-end approaches, tax-loss harvesting strategies are frequently discussed. As April 15 approaches, there are usually ideal opportunities to coordinate with clients’ tax preparers. These are fertile situations to furnish a more comprehensive understanding of what the advisor can contribute to the relationship.

By working to build professional alliances, you’re also helping to strengthen your practice. If your clients do not receive the service and support they expect from you, chances are they will look elsewhere to find it and when they do, it will probably be only a matter of time before they move the rest of their business.

Kortney Christensen, CPA, CFP and director of Life Event Services at Wachovia Securities in St. Louis, manages a group that assists financial advisors and their clients on issues such as Social Security, executive compensation, tax planning, estate planning, and education planning. “Family financial talk can strengthen relationships, bring peace of mind and ensure more positive outcomes,” she says. “Particularly during these volatile economic times, dialogues about changes in life plans and financial status, or even a conscious decision to change nothing and ride out the present upheaval can help make everyone better informed and more secure.”

Compensation for such relationships is on a case-by-case basis. While “finders’ fees” are generally not expected by most professionals some form of compensation is justified when a relationship begins requiring significant amounts of time and skill. Some advisors say that when a product is furnished as a direct result of a referral a 50-50 split may be in order. Others submit a flat-fee proposal based on the amount of their involvement in any subsequent business.

Assistance a broker-dealer or insurance provider may supply to help cultivate alliances varies by company. Schwab’s GrowthPoint program helps advisors with business strategy and planning, as well as human capital, marketing and transition planning. The final point is an area that’s widely anticipated to be a new engine for business growth as the recession of 2008 delivers a huge wave of people being forced either into early retirement or new positions. This can create new opportunities for advisors whose expertise and access to other professionals may help clients during this transition and ideally bring in new business.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.