"While client referrals are certainly a worthwhile source of qualified prospects, your major focus should be on cultivating referrals from other professional advisors."

Where the Clients Are

By John Bowen

Ah, your best client. You know the one: He or she walked through your office door with the perfect amount of assets for you to manage at the very beginning and has given you more assets to manage every year. The one who refers his or her colleagues and friends to you. The one you really enjoy helping to reach his or her long-term financial dreams.

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Wouldn't you like to get more clients just like this? Clearly, attorney and accountant referrals are the best source of new, best clients for advisors, with client referrals running a distant—but not insubstantial—second. Few other ways can so effectively bring in additional assets and grow your business.

WHERE THE BEST CLIENTS COME FROM

To find more of those elusive clients, start by looking at how affluent individuals find their advisors. CEG Worldwide Senior Managing Principal Russ Alan Prince conducted a survey of more than 1,400 wealthy clients, each with between $500,000 and $5 million in liquid assets. The study found that more than half of those surveyed—54.2 percent—found their primary financial advisor through a referral from an accountant or attorney. Referrals from other clients ranked second, at 30.1 percent. All other sources, such as mentions in the press, direct mail or cold calls were relatively insignificant.

The story was much the same when 512 advisors were asked about the source of their best new client (one with at least $500,000 or more in investable assets over the previous 12 months). Nearly two-thirds of the advisors (64.4 percent) cited a referral from an accountant or attorney, while 29.5 percent said the source was a referral from another client. All other approaches amounted to just 6.1 percent.

The study reinforces what our experience has shown us: While client referrals are certainly a worthwhile source of qualified prospects, your major focus should be on cultivating referrals from other professional advisors, in particular, accountants and attorneys.

The reason for this is simple. While clients may be quite willing to provide you with referrals, the fact remains that any one client will know relatively few qualified prospects. In contrast, accountants and attorneys who work with the wealthy tend to have relationships with many affluent individuals.

And because accountants and attorneys generally have a clear picture of their clients' financial situations, they are in a position to know both when an individual is qualified for your services (in terms of investable assets or net worth) and when he or she needs your services. This is information that your clients, by and large, will not have about the friends and colleagues that they could potentially refer.

Perhaps most important, the individuals referred to you by accountants and attorneys are much more likely to end up working with you than those referred to you by clients. The wealthy believe—rightly so—that they have complex financial situations that require the expertise of an authority. And they know that the best way to find an expert is often to ask another expert—in this case, an accountant or attorney.

BUILDING STRATEGIC PARTNERSHIPS

Should you choose to focus your efforts on developing referrals from accountants and attorneys, you then need to choose your approach for generating strategic partnerships. Many advisors try to generate referrals in a haphazard way, without much of a plan in mind. For example, they might invite an accountant or attorney to breakfast or lunch, vaguely hoping the professional will remember them the next time a client requests a referral. Or they might refer the professional to their own clients, hoping there will be "payback" down the road.

While these methods may occasionally result in referrals, they will not provide the systematic stream of qualified prospects that you're really looking for. To achieve this, you need to build true strategic partnerships with accountants and attorneys. These alliances are mutually beneficial relationships where both parties take specific steps to help the other to grow his or her business.

Although no two strategic alliances are exactly alike, the most successful alliances all have several important characteristics in common:

Defined give and take. The financial advisor provides a clear value that the accountant or attorney needs. This may be expertise in financial services or access to particular financial products, or it may be expertise in practice management and business development. In return, the other professional provides a clear value to the financial advisor: typically, referrals for qualified prospects.

Active participation. Successful strategic alliances are actively cultivated by both parties. Because both the financial advisor and his or her strategic partner receive clear value from one another, each is constantly on the lookout for opportunities to work together. One positive benefit of these alliances? Because the financial advisor is first in the mind of the accountant or attorney, he or she receives most (or even all) of the referrals that professional makes.

Added value for clients. Clients win in a successful alliance. They receive the expertise they need to overcome financial challenges. And, they're able to obtain that expertise through the trusted relationship with a key advisor: their accountant or attorney.

SUBTLE DIFFERENCES

Despite many similarities, there are also differences between alliances with accountants and those with attorneys.

Economic glue. While alliances with accountants and attorneys must have economic glue to hold the partnership together, this glue takes a different form with each professional. Alliances with accountants often include a revenue-sharing agreement that creates a vested interest for each partner to help the other to grow. The most effective glue for an attorney and an advisor, is indirect financial incentives, primarily ways that the advisor can add value to enhance the attorney's business.

Advisor's business model. Our research shows that different types of advisors tend to pursue alliances with different types of professionals. A referral from an accountant was the primary source for the vast majority of surveyed investment generalists' best new client (69.7 percent). But just 29.3 percent of wealth managers credited an accountant for their best client. Instead, attorneys were the key referral source for most (57.6 percent) of the wealth managers.

Level of formality. Alliances with accountants are usually guided by a formalized agreement that has been clearly described and committed to by both sides. Alliances with attorneys are often more informal affairs.

Point of contact. While an advisor may introduce the idea of a strategic alliance to a single accountant within a firm, he or she is likely to need to gain consensus on the agreement from all partners. But in strategic alliances with attorneys, the advisor will usually only work with one attorney. Other partners in the firm may have no involvement.

Type of accountant/attorney. While strategic alliances are workable with a number of different types of accountants, alliances with attorneys are most effective with one kind: private client lawyers, who specialize in trusts and estates as well as asset protection.

Strategic partner's relationship with the client. The relationships between affluent clients and their accountants and those with their attorneys are fundamentally different. Wealthy clients tend to be in contact with their accountants several times a year for a variety of business and personal tax matters. In contrast, affluent clients typically only work with attorneys for a limited amount of time (for example, when constructing and implementing an estate plan). However, because of the nature of the work and the relationship between the lawyer and wealthy client, these clients are likely to follow up a referral provided by their attorneys.

Effective strategic alliances with the right professional advisors can be critical in your quest to find more clients who are just like your best client. With several best clients on hand, your practice will be well positioned for growth.