By Michael Byrnes
Strategic use of centers of influence-professionals who are in a position to exchange referrals with financial advisors-can lead to a steady stream of revenue, according to speakers at last week's Schwab Impact conference in San Francisco.
"Client and professional referrals are the foundation of growth for an advisory firm," said Scott Slater, managing director of business consulting for Schwab Advisor Services. "It's important that firms develop skills at generating client referrals in their firm first. With that base, then advisors can move to the next level of growth by implementing a strategy focused on centers of influence. Convincing other professionals of your unique skills and expertise requires more focus and preparation than client referrals."
Julie Littlechild, president and founder of Advisor Impact, told conference attendees that relationships with centers of influence (COIs) need to be nurtured.
COIs can include professionals in accounting, law, estate planning, insurance, lifestyle services, services for aging parents, psychology or even the funeral home business, she said. "It is about creating your own network," Littlechild said.
Finding The Right Fit
Advisors need to assess whether a center of influence is a good fit for his or her clients, Littlechild said. She asked the attendees to think about their current COIs. "Is it just because they are an accountant, or is it more?" she asked, adding, "To have true partners, you have to know who they are."
Advisors need to look at the level if wealth the center of influence serves. Among the questions advisors should ponder, she said, include "Are they willing to play a partnership role, sharing information that isn't confidential?" or "Do they have similar client service strategies?" Advisors shoulud even visit the CIOs office, she said. "Is it formal or casual?"
Before entering into a relationship with a CIO, an advisor needs to establish whether the CIO is willing to reciprocate on referrals, Littlechild said. "Only 30% [of advisors] address referrals before entering into a business relationship. Seventy percent go in without knowing," she said. "It is not about 'Will you send me everyone?' It is about 'Will you send me the right person when there is a specific need?'"
Among the questions advisors should ask COIs:
What would we have to do to be a referral in your eyes?
What are the logistics? What are the details?
How are we going to know if this is working?
Littlechild suggested giving centers of influence knowledge of how you work. Communicate the value that is provided to clients so COIs understand why they should provide referrals, she said.