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.