To grow their firms significantly,most advisors need to learn to move beyond their own existing affluent clients and acquire additional high-net-worth investors. Forming strategic alliances with the right professional advisors—such as CPAs and attorneys—is one of the best avenues for accomplishing that goal.

Unfortunately, these strategic alliances are an area where many advisors often get tripped up and frustrated. They think that it isn't worth their time and effort. With that in mind, here is some advice on how to handle strategic alliances.

The Key To Success

Unlike a casual or informal referral arrangement, a strategic alliance is a business development agreement designed to motivate each partner to help the other one grow. This agreement creates economic glue that holds together a mutually beneficial partnership. The agreement provides for an ongoing relationship, and it sets the stage for a long-term and profitable relationship for both parties.

The heart of the agreement is providing a set of benefits to the other professional—most often in the form of additional services or more specialized expertise—that result in additional revenue. While you can develop strategic alliances with any professional who shares your target market, alliances with CPAs and attorneys tend to be the most powerful.

We know for a fact that strategic alliances are an important resource for the top financial advisors in the industry today. When CEG Worldwide surveyed nearly 2,100 advisors last year, we discovered that more than 80% of wealth managers see referrals from other professionals as a very important source of new clients. In sharp contrast, just over a quarter of investment generalists see such referrals as a very important source of new business.

As I've pointed out in previous columns, true wealth managers earn $881,000 on average annually, versus just $279,000 for their investment generalist peers. That fact alone tells us how important it is to pay attention to the habits and practices of today's wealth managers.

Furthermore, referrals from other professionals are also extremely important to the success of wealth managers. Again, more than 80% of wealth managers told us that their five best new clients were referrals from other professionals—almost five times the number whose top five new clients came through the next-best method: client referrals.

Meeting the Challenge

That said, many financial advisors find it difficult to form effective strategic alliances with other professionals. Frustrated advisors often tell me that they have put in significant time and effort in this area, with limited results. The problem typically is that the strategic alliance partner does not feel highly motivated to work with the financial advisor, and therefore he or she doesn't refer many (or in some cases, any) of his or her clients.

The solution to this problem is to be clear and compelling in how you communicate the benefits of working together to a potential strategic alliance partner. You've got to spell out what's in it for them when they send their clients your way. This can be done by focusing on three benefits:

Money. Not surprisingly, one of the best ways is to focus on the financial advantages of forming an alliance. It's common in revenue-sharing agreements between advisors and CPAs for the accountant to get a 25% share of the gross revenues that are generated through the agreement. So assume that a CPA partner sends you a client with $1 million in assets. If you charge a 1% fee, the CPA will receive $2,500—without any increase in cost or effort on his or her part.

Sit down with the CPA with a legal pad or spreadsheet and carefully go over the financial potential that he or she could realize by referring clients to you regularly. Together, draw up a brief strategic action plan that estimates first-year revenues, as well as projections for revenue growth over the next two to three years (using reasonable assumptions for the clients' growth in assets under management).

Indirect incentives. Attorneys generally do not enter into revenue-sharing agreements. In cases such as these, you can still show the potential partner that there are tangible benefits to working with you. On a foundational level, you can highlight the desirable aspects of working with someone who shares the same level of integrity and devotion to client service that they possess.

You can also show how the two of you can collaborate to solve the potential partner's clients' broad range of challenges. Effectively, you can offer to help the attorney build his or her business by providing reciprocal referrals as a member of your expert team. In addition, another form of economic glue is your ability to offer practice management support. Many attorneys know that there are untapped opportunities to work with the affluent, and they are interested in finding assistance that allows them to take advantage of these opportunities.