5 tips for referring clients to a financial planner

An agreement between an accountancy practice and financial planner is a relationship like any other, so regular communication is vital.

Referring clients to an appropriate financial planner can benefit all parties, but it is imperative that public practitioners apply due diligence to the process.

In order to offer financial planning product advice to clients, practitioners must hold an Australian Financial Services license or be authorized as an AFSL representative.

Those who aren’t can still help clients access such services by setting up a referral arrangement with a financial planner.

However, it is important to enter these arrangements fully informed. Here are five tips to help ensure the best outcome.

Do your homework

The first step is to have several meetings with a prospective partner to make sure you understand the firm and its client base and would be comfortable working with and referring clients to the practice. Planners need to represent themselves as well as you do, otherwise it can be a risk to your own reputation.

That said, getting on with a planner isn’t enough. Practitioners should ask to see sample advice documents and redacted Statements of Advice (SOAs) to gain full insight into the sorts of services they can refer their clients to receive, says Licensing for Accountants (L4A) founder and chief executive Kath Bowler.

Bowler says practitioners also need to understand and agree with the planner’s investment philosophy. 

“Even though they may not think they need it, they probably should have in the back of their minds an investment philosophy that they believe in because for this relationship to work there needs to be a meeting of the ways in terms of investment philosophy,” says Bowler, a specialist consultant to accountants wanting to expand into financial planning.

Take a long-term view

Practitioners need to take a long-term view when forming a relationship with a financial planner to ensure they don’t miss out on ongoing income, she adds.

They can be paid solely on referral, but this means they are often not very invested in making the relationship work.

A joint-venture (JV) might be preferable.

Related resources: Financial planning advice tools, templates and resources from CPA Australia 

“Once they do an initial piece of work, typically, planners are putting their clients on retainers because there needs to be ongoing maintenance,” Bowler explains. 

“If practitioners just accept a one-off referral fee, they’re missing out on that ongoing relationship. This is the sort of revenue they’re potentially giving up by not moving into the space, but it’s very valuable to the planner and practitioners need to be remunerated accordingly.

“With JV models, the harder it is to set up, normally, the bigger return at the end of the day.”

Be aware of issues of independence

Accountants should also consider their independence when referring clients to financial planners. Issues related to independence are governed by APES 110 Code of Ethics for Professional Accountants, but essentially accountants need to ensure that the motivation for establishing the relationship with a financial planner is first and foremost in the best interests of the client, says Josephine Haste CPA, Manager – Quality Review Education, CPA Australia.

“You would choose a service provider you thought was reputable, that had a similar process for ensuring they were abiding by ethical frameworks, and delivering quality of service,” Haste says. 

“You may want to align yourself with a practice that is subject to similar rigour and oversight to what you’re subjected to as an accountant within the profession.”

Accountants must declare any referral fees or commissions they receive from planners to the client involved and also know when these referral fees can create “a self-interest threat to independence”, because they as practitioners are benefitting from the engagement with a third party.

APES 110 Code of Ethics for Professional Accountants provides what is expected from members with respect to referral fee income at section 240.5 to section 240.8.

“You have a duty of care to ensure that you’re not referring your client on to just anyone for basically the greatest fee,” Haste warns.

Professional Development: The unlicensed accountant's toolkit: are you considering your licensing options? This online toolkit includes a recorded webinar and access to a resource library to help you understand your boundaries when giving advice.

Take care with the agreement

Any agreement should address in detail how the financial planner and public practitioner plan to engage, covering things like the basis for remuneration and commitment in terms of time, says Brent Szalay, founder and managing director of Melbourne-based SEIVA Accountants.

“That might mean committing to coming in for certain days per week to the office or something like that,” Szalay says.

The agreement should also cover off how to manage potential disputes, while another important issue is how to deal with work that crosses between financial planners and accountants.

“It’s important to stipulate everything in writing from the start when all is good and well,” Szalay says. “If and when things start to turn sour, you want to be able to turn to a document rather than end up in court.”

It is a good idea to build a trial period into the agreement before locking in anything too long-term.

“Once you do enter into an agreement, after 12 months check and make sure everything’s okay and both parties are still happy,” he suggests.

Maintain regular communication

An agreement between an accountancy practice and financial planner is a relationship like any other, so regular communication is vital.

“Communication is everything,” Szalay emphasises. “I would try to embed it into a weekly process as a minimum, depending on the level of activity. Even if there’s not something [significant] to say, it’s important to continually touch base as it shows a commitment by both sides.”

Finally, along with discussing how the arrangement is working, the planner might provide updates on any developments in financial planning the accountant should be aware of, while the accountant could canvass the potential referral of new clients.

Read next: Building the right referral network for accountants


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