For many years, advisors have looked to centers of influence (COIs) for client referrals to help fuel growth—and for good reason.
Many affluent individuals rely on COIs as well as family and friends for advice on a range of life and financial concerns. Those COIs include accountants, attorneys, insurance specialists and other professionals who provide guidance to their clients. These relationships are characterized by very high levels of trust, and when a COI recommends that one of his clients work with another professional, the clients tend to follow his advice.
With this in mind, it’s no surprise that advisors are working harder than ever to build and solidify relationships with other trusted professionals. However, the offices of these COIs are becoming ever more crowded with advisors seeking referrals. CPAs and attorneys report that they are fielding solicitations from financial advisors at a rate of nearly once a week. This prospecting rush makes it difficult for advisors to set themselves apart and develop relationships with potential COIs.
Moreover, generating COI referrals is a long-term undertaking. For nearly two-thirds of advisors, it takes more than a year to see a referral. As a result, many lose patience and are frustrated by the return on their time and efforts working with these professionals. While almost all advisors (94%) in a 2011 survey by Advisor Impact said they work with COIs, only 1% described their COI approach as “very effective.” The good news is that advisors who are willing to go the distance and subscribe to a systematic process are standing out and realizing significant growth for their efforts.
Forging A Strong Bond
For those who do it right, cultivating a strong COI network has paid huge dividends. According to the 2013 RIA Benchmarking Study from Charles Schwab, the fastest-growing firms achieved over three times the median net new assets from professional referrals in 2012—and they are getting more new business referrals from COIs than their counterparts get from all referral sources combined.
Clearly, these advisors recognize that effectively working with COIs allows them to amplify their value proposition within the community they wish to serve, resulting in more referrals—the lifeblood of growth.
What are these advisors doing differently to stand out?
They have a clear goal and, equally important, a systematic process to achieve it. They sharpen their focus to build a small number of high-quality, strategic relationships and have a formal, structured process to target the right COIs and demonstrate the value they can add for these COIs and their clients. In fact, since developing meaningful relationships with COIs can be a challenge for many advisors, we have created a comprehensive, multi-week consulting program, called “Leveraging Centers of Influence,” to help them build and implement their COI program. It is based on insights and best practices from advisors that work with COIs so well.
Here Are A Few Takeaways:
Focus on strategic relationships with a few COIs. Rather than casting a broad net to reach as many COIs as possible, build deep connections with a small number of professionals—typically up to six per advisor— who align with your business and goals.
If you chase every COI that crosses your path, you’ll end up with a healthy stack of business card “relationships” that will likely go nowhere. Advisors who can focus on carefully selected COIs tend to develop professional relationships that have deeper levels of trust, ultimately leading to a consistent stream of referrals over time.
Build a process and stick with it. Successful firms have a consistent, repeatable process to engage COIs with confidence over the long haul. Sticking to a structured process will help you target ideal COI partners, communicate a compelling message and build the trust that is the foundation of an ongoing relationship. It ensures individual activities and tactics are mapped properly to a larger strategy, making you more efficient and your efforts more productive.
Target the right COIs and focus your efforts. While the ideal COI depends on a variety of issues that will differ from advisor to advisor, keep in mind the following three factors as you search for the right COIs:
1. Chemistry. Compatibility is a key driver of success in any relationship, so consider how a potential COI’s personality, background, interests, values and professionalism mesh with your own.
2. Types of clients. The best partnerships involve advisors and COIs who focus on similar types of clients. The similarity helps ensure that you can bring value to your mutual clients and increases the likelihood that you’ll get referrals.
3. Service offering. Ideal COI partners should provide services that complement your own offering. This will allow you to deliver the type of holistic, comprehensive wealth planning that resonates with your clients.
Demonstrate your value. To get referrals, you must help COIs see the specific and unique value you bring to the client relationship and how together you can help solve clients’ problems.
The best way to do this is to have potential COIs experience your approach for themselves. After you have carefully identified a qualified COI, have him or her see what it would be like to work with you by sharing case studies that demonstrate your expertise and show how you solved specific, real challenges your own clients faced. Be sure to use clients whose profiles mirror those of the COI. Afterward, invite COIs to meet in your office, introduce them to your team, and help them experience the unique value and capabilities of your firm.
This direct interaction allows other professionals to envision what it would be like for their clients to work with you from the moment they walk in the door. This will help differentiate your service model, expertise and competencies from those of other advisors asking for referrals. Ultimately, this interaction will help them determine whether you are someone to whom they can entrust their clients.
Making A Long-Term Commitment
Establishing mutually beneficial professional relationships with COIs takes time and effort. It requires a structured process to create meaningful interactions with the right prospective partner, and sticking to that process can set you apart from those advisors who fail to follow one. Those who commit to cultivating strong connections with a few key partners over time reap the rewards of a growing ideal client base and a flourishing firm.
Nick Georgis is vice president of practice management and strategic business development with Schwab Advisor Services, a leading provider of custodial, operational and trading support for nearly 7,000 investment advisory firms.