Organically grown
In a highly competitive market, strong referral relationships are more important than ever and can help attract clients, says Charles Wootton
There is no doubt the intermediary sector is competitive. Advisers are continuously benchmarked against their peers, and the importance of providing unmatched levels of customer service cannot be ignored.
In the post-Retail Distribution Review world, clients need to feel valued more than ever, and they want proof that their adviser goes the extra mile time and time again. The bar has risen, and the sector has to respond.
It is inevitable that failing to provide high levels of customer service will result in heavy client losses - something that none of us can afford in today's industry. Existing clients are the holy grail. Before any adviser seeks to bring more customers on board, they first need to be assured that their current client base is happy with the service they provide. Taking a long, hard look at this aspect of their business is, undoubtedly, the best place to start.
Increasingly, we are seeing referral relationships adding another string to the bows of consultants or advisers across myriad sectors. Through this relationship, the adviser will provide clients with another layer of service or advice in a related field.
No fees
The referral relationship is founded on trust, and not based on financial arrangements, where one party provides a commission or fee for the referral.
The value is not commercial. It's about the improved or enhanced service provided. If, for example, one of the parties has a general query, they can pose this to their partner for a quick (non-fee based) response.
And client relationships are built on trust. So it is important for the adviser to line themselves up with a referral partner that they, in turn, trust. They need to be reassured that they are passing their 'valued' client onto an expert source. Providing best practice, on all levels, will deliver real benefit to the client.
As an example, when it comes to giving financial advice, often issues of inheritance or trust planning come into the picture. Discretionary fund management and revenue-approved tax structures are reviewed, but a legal point of view is also required more often than not.
Equally, the same is likely to happen on the legal side, where financial advice is probably called on. Or this may happen where a mortgage is taken out, and a solicitor's firm can be recommended to manage the conveyance.
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Wootton on theory in practice Some colleagues and I have been worked closely with Streathers Solicitors for about five years. For a long time, I had been looking for a good firm of solicitors to refer my clients to. I worked with Chris Daynes, a partner at Streathers, on a specific case, and both the client and I were impressed. Since then, we have passed more than 40 pieces of work across to the team at Streathers and Chris regularly attends fund manager meetings and training sessions set up by my firm. Chris says: “It is vital for referral partners to have a comprehensive understanding of the services each provides to their clients. From both sides, we have worked hard to get to know each other’s business and goals. Foster Denovo knows how we work, how we charge, and partners are able to recommend their clients to a safe pair of hands for legal advice, which in turn enhances their value to their client.” The bread and butter of a private client solicitor’s work relates to wills, trusts, probate, powers of attorney, estate planning and tax. Few of these areas can be dealt with in isolation satisfactorily. For example, when writing a will for a client it will typically spark off a conversation about life protection, pensions or inheritance tax planning. “It serves the client well, and therefore enhances our relationship with the client, if we can introduce them to trusted financial advisers to advise on these aspects,” adds Chris. “From the client’s point of view, they want to know they are getting excellent service at a reasonable price. There is so much overlap between a financial advisory firm and a private client solicitor. Operating in isolation is potentially very shortsighted. Working together not only gives us a wider perspective on the client’s needs, it also helps to mitigate risk.” These referral relationships start small, and when well nurtured, you never know how they can develop. The foundations need to be in place, and everyone needs to work towards the longterm goals for the businesses and primarily for the respective clients. |
Dovetailing services
All three parties in the relationship must remember that the client's interests should always be at the heart of the matter. The financial adviser or the solicitor (operating on their own) can only take it so far. Working together, they can dovetail their services for the best outcome, which ultimately will develop good fee-earning opportunities for the providers, as well as the best levels of service.
Overall, this type of working practice is also likely to support the reputation of the relevant industry. If, for example, the financial adviser works with a solicitor who is a respected name and does a good job, clients are more likely to praise both firms - and the two working worlds will become more aligned.
Establishing and sustaining a valued referral relationship is an investment, so it's worth noting the following tips:
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Don't use a referral opportunity as the chance to 'chase the money'. Always have in the back of your mind that it is about adding value to the overall client proposition.
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Do your due diligence and check the service levels of the business you will be working with. Are they compatible with yours?
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Make sure you address fees up front. Do they fit in with yours?
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Monitor the relationship on a continuing basis, and get feedback from your clients. Are they happy with the service they receive from your referral partner?
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Make sure your referral partner is willing to understand and absorb details about your service offering, so that they fully appreciate what you are trying to achieve on behalf of your clients.
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Remember it takes time to build the trust and confidence, so start slowly.
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Spend time getting to know each other's businesses, and be prepared to bat ideas back and forth for each other - without the clock ticking.
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Take time to understand each other's business so you know how the other party wants to develop.
Of course, advisers (and other practitioners) don't have to have referral relationships in place, but think about economies of scale.
These partnerships can come ?into their own and generate a healthy amount of business, which can often remove the need to go out and search for more.
Charles Wootton is a partner and financial adviser at Foster Denovo