SAN DIEGO – One of the best sources for advisory referrals are smart, connected professionals such as accountants, attorneys, business leaders, even other planners with different specialties. In fact, referrals have the potential to provide 60% of a firm’s new business, according to a recent study by Charles Schwab.

Getting these so-called centers of influence to send new business your way is easier said than done, however. Too many advisers are laboring under powerful misperceptions about how to make it happen, according to Nikolee Turner, managing director of the business consulting services group for Schwab.

Among the biggest COI myths:

Referrals are reciprocal.

  • Tit for tat just isn’t the way things work, says Turner.

Personal relationships equal professional relationships.

  • Just being friends isn’t enough. They may be pals, but do they even know the core values of your firm?

Lunch is a strategy.

  • Once the relationship is established, fine. But not before.

The more relationships the better.

  • Not enough focus.

My value is obvious.

  • To you, maybe. Others need to hear it.

Well, that’s a bummer. But wait — there are ways to develop an effective COI strategy, Turner promised at a breakout session at the Schwab Impact conference.

First, remember that you’re trying to achieve a partnership. And always keep in mind what your COIs are looking for: advisers who are trustworthy and objective; put clients first; do good work; are transparent and simple and who respect the gatekeeper.

Advisers shouldn’t have more than six COIs, Turner says. What’s more it’s a long-term process: 62% of high-performing firms told Schwab they had to work with one a year or longer before a referral was generated.

Find one you can grow with, and treat them like you would your best clients, Turner advises.

HOW TO CULTIVATE COIs
Define your target COI, whether it is an accountant, a local business executive or another adviser. Make sure you’re going after a diversified group, contact them and build rapport to see if you get along.

Then set up a meeting — not lunch — at their office. Don’t pitch them: you’re there to find out about their business, their concerns and their needs. Ask questions and listen.

If your potential is a fit, continue to build rapport, and go back for another meeting. This time, bring up referrals. Do they believe in it? If so, what problems can you solve for them? Then describe the value you can offer to help their business.

If you can agree on the way forward, set up some guiding principles. For example, when making a referral, don’t merely give the client the COI’s business card, and vice versa. Write an email to the client making a personal introduction between the two.

Demonstrate your value to the COI. If they do the same for you, nurture the relationship.

Now you can have lunch with them!

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Charles Paikert

Charles Paikert

Charles Paikert is a senior editor at Financial Planning. Follow him on Twitter at @paikert.