According to research, most financial advisors have devoted some effort to build business by reaching out to other types of professionals. But most are fairly ineffectual. One big reason is that they are pursuing the wrong professionals.

Consider your own experiences. You’ve probably had more than a few breakfasts, lunches and dinner meetings with prospective referral sources. Let’s add in a few meetings without food. If you’re like most financial advisors, you’re very likely spending a lot of time, money and effort on that process. And again, you’re likely looking for the wrong people.

Say you’re an investment advisor trying to convince an accountant that active management is better for their clients than buying and holding index funds until they need the money. Given the way financial advisors usually behave, you will likely continue to take the accountant to lunch to persuade him, periodically believing that he will recognize the value of active management. The accountant will likely continue going, as long as the restaurants continue to be appealing.

Or perhaps you’re a financial advisor who has had almost a dozen lunch meetings with a trusts and estates attorney and her partners to discuss the use of sophisticated life insurance with advanced planning strategies. Attorneys generally believe they can mitigate estate taxes over time, leaving little if any need for life insurance. They think all that’s really required is term insurance until all the possible estate taxes are eliminated.

Still, you seek out new and intriguing ways to incorporate life insurance into the advanced planning strategies. You’re confident that eventually you’ll find a pairing that “wows” this attorney. And you will continue to meet with her every time a new life insurance policy variation comes along.

Or take a third-party marketer explaining the benefit of carefully chosen alternative investments such as hedge funds and private equity to an accounting firm’s family office group. The accountants are squeamish because there’s a chance their high-net-worth clients could lose money, and these investments lock in funds for a period of time. The wealthy clients are only interested in safe investments.

Yet the marketer is convinced that the accountants will come around and see how hedge funds and private equity funds work in a risk-adjusted portfolio. The marketer is ever hopeful that the accountants will then happily introduce their wealthiest clients to him. The only thing required is persistence.

Indeed, most financial advisors will be persistent in these scenarios, hoping to convince another professional of the validity of their positions. But even though perseverance is an important component of success, there are limits.

In a survey of 549 financial advisors, 93.3% report spending way too much time pursuing these “wrong” professionals. In general, they look at the opportunities and “feel” that if only they can persuade these other people, they can tap into a vein of affluent clientele who will come their way en masse.

A Magic Word
The flaw in this logic is that it’s highly unlikely the advisors will persuade such professionals. Meanwhile, there are a plethora of other professionals more likely to be receptive.

Street-smart networking is a marketing framework, not a sales pitch. Many self-made millionaires have honed their ability to identify and motivate the appropriate people to join their core networks.

You need to learn not to waste your time trying to sell the wrong people on your knowledge and abilities. You’ll undoubtedly be wasting your time and energy (and lowering your earning potential). Instead, you need to find the “right” people, which is why the evaluation process is so critical.

Say to yourself, “NEXT,” which stands for “Never expend X-tra time.”

If you’re not seeing somebody introduce you to his or her affluent clients—if he or she is not becoming a proponent of you and your expertise—it’s time to use the word. A street-smart networker knows this: You are the one choosing the centers of influence you want to work with; they are not choosing you. That gives you the relationship leverage. When other professionals refer you to a client, they should be doing so because it’s in their best interest.

Being Able To Say It
Many advisors grasp the concept. They understand that rarely have they been able to convince accountants, for example, that their positions were more than 100% self-serving as opposed to being prudent for certain affluent clients.

But there’s a Grand Canyon-sized gap between intellectually understanding the importance of saying “Next” and doing it.

For one thing, many advisors overestimate their own ability to “sell.” Even if they are accomplished salespeople, selling their perspective to other professionals hardly ever works. And swimming against a tsunami is rarely a cost-effective approach.

They are also under the misapprehension (fantasy) that if an influential professional did come around to their way of thinking, he or she would send affluent clients over in droves.

Advisors also err in thinking that, having committed a good amount of time and effort to trying to win somebody over, it would be a waste to give up now. It’s the same thing as trying to convince clients to sell money-losing investments when they hope for some sort of turnaround that is never going to happen.

Just as it’s better for the investor to cut his losses, it’s better for the financial advisor.

Self-made millionaires judiciously say “Next” because they want to make sure they have options. Street-smart negotiators have the relationship leverage because they provide enormous value to others. If you want to effectively create a consistent flow of new affluent clients for your services, the answer is to become a street-smart networker. This means being able to say “Next.” 

Russ Alan Prince is president of R.A. Prince & Associates Inc. and executive director of Private Wealth magazine.

Brett Van Bortel is director of consulting services for Invesco Consulting, the sales consulting group within Invesco Distributions Inc. The opinions expressed are those of Russ Alan Prince and Brett Van Bortel, and are based on current market conditions and subject to change without notice. These opinions may differ from those of other Invesco investment professionals.