Having spent many years building up your business, you wouldn’t want to jeopardise your reputation or clients’ financial security by referring them to the wrong financial planner. Luckily, help is at hand.
By Zilla Efrat
CPA Australia has released a succinct referrals guide for accountants, co-authored by Kath Bowler FCPA, CEO of Licensing for Accountants, and Paul Derham, a partner at Holley Nethercote, a law firm specialising in financial planning issues.
Bowler says she began writing the guide after coming across so many guides prepared by planners on how to form relationships with accountants.
“They were always coming from the planners’ side of things,” says Bowler.
“I was trying to put accountants back into the driver’s seat and to help them proactively steer the relationship rather than sitting in the passenger seat and letting that relationship unfold as the planner might wish.”
With accountants now required to be licensed to provide financial advice, the guide offers tools to help them work out what they intend to become licensed for, what they need to do when referring clients and how to assess potential referral partners.
It also details the factors to consider when forming a referral arrangement and the key steps needed to ensure a successful relationship.
Do your homework before you begin
According to Bowler, one key to success is doing plenty of research before you begin.
“If you have done your homework from the start, you can avoid problems down the road. And there are lots of checklists in the guide to hopefully make that process easier,” she says.
CPA Q&A. Access a handpicked selection of resources each month and complete a short monthly assessment to earn CPD hours. Exclusively available to CPA Australia members.
The guide recommends that you identify and screen at least three potential partners and have several meetings with them to ascertain synergies, common experiences, benefits and get a general feel for their business.
Bowler believes the structured approach taken in the guide may encourage accountants to ask questions they may not have previously felt comfortable asking so early in the referral relationship.
For example, she suspects that many accountants don’t look at financial planners’ advice documents before referring their clients to them.
“A good fit with the planner is very important. Accountants need to look at the document prepared for other clients to see if they agree with the advice,” she says.
“Accountants can’t comment on the advice to their clients because they are then providing advice themselves so they need to get comfortable with the advice documents before they introduce the client.
“It’s all about gaining that confidence and comfort with your referral partner.”
Watch: The changing regulatory landscape for financial services
Find out about an adviser’s investment philosophy
Another area Bowler believes accountants may not consciously think through is whether they are comfortable with the adviser’s investment philosophy.
“Even though they are not recommending the investments themselves, I have no doubt that accountants would have a view on active versus passive investing or about direct investments,” says Bowler.
“As an accountant, you need to think about what kind of investments would suit your client.”
One way of assessing the quality of the advice and whether it’s compatible with your philosophy is to ask the planner to take you through his or her process using your own financial situation and goals. This will give you a feel for what your clients will experience and allow you to review the advice based on your information.
Bowler also warns of a possible mismatch in expectations when forming referral relationships.
“Accountants often have large client bases and as a result, planners may believe they will get a significant amount of referrals. In practice, they may only get one or two referrals a month, if that.
“So both parties need to have an open conversation about what the expectations are in terms of referrals.”
Accountants should also weigh up the trade-offs of using a panel of advisers, says Bowler.
“A panel approach may sound appealing, but if you invest a bit more into the relationship, you may get more benefits.”
For example, a planner on a panel may not have the same commitment to your clients as might a planner with whom you have a one-on-one relationship.
Watch: Managing overseas clients
Referrals: A handy checklist
The referral guide forms part of the resources of the Unlicensed Accountants and Licensed Accountants Toolkit. For a complimentary copy of the referral guide, please email: email@example.com
- Establish a trial period to begin with. Only after you feel confident, draw up a formal arrangement.
- Plan an exit strategy – at the start! As part of this, you should agree on who keeps the client, how ongoing client service will be maintained and what will happen to existing revenue arrangements.
- Agree on what you both want to achieve from the arrangement and document this.
- Develop a 12-month action plan that sets out these goals and confirms how processes will work.
- Ensure that everything is done in line with the requirements of the Privacy Act.
- Be sure to disclose any remuneration or benefits received from your association with the planner.
- Develop a marketing plan to effectively communicate what’s happening with your clients in a clear and consistent manner.
- Maintain regular formal and informal contact with your referral partner and get ongoing feedback on client activity, responses and the process.
- Measure the performance of the relationship against the objectives you both set and have regular and formal reviews. This allows you scope to rectify any issues as they arise.
Lawyer warns on referral relationship litigation risk (SMSF Adviser)