For as long as I can remember, business and financial professionals have been trying to form referral relationships with other professionals – be they accountants, lawyers, financial planners or mortgage brokers. The idea isn’t new but experiences can be mixed. For every referral relationship that’s working well, there are far more that under deliver what the parties expected. Too often, something which promises to be a “win-win” for all parties, eats up more time and energy than expected, resulting in less than desirable returns.
In my experience, the referral arrangements that fail to produce significant benefits for both parties are failing because the advisers have rushed into the relationship without being clear on one (or more) of the following aspects:
- What it is they want from the relationship
- Whether the referral partner is right for them (and their clients)
- Whether they can deliver what is required in return
When approached correctly though, referral relationships can be a great way of delivering higher service standards to your clients and generating new revenue streams. So how do you identify the good referral networks that will work for your firm?
1) What are you trying to achieve from the referral relationships, and for who?
Before you proceed it’s absolutely essential you know the answer to the above question. You might be looking for someone to provide a higher standard of advice and services, to your clients, that isn’t there today. Or you might just be looking for the best solution for your clients. Or you might want to develop a reciprocal arrangement where you provide services to their clients.
If this sounds like you, you need to ensure you’re building referral relationships where both parties are aligned and meet each other’s strategic, or service, needs.
The mistake advisers often make when building referral relationships is to brush over this step and get frustrated or offended when they receive little or no clients in return.
Outline your key objectives of what you are trying to achieve and what you’re expecting from the relationship from the outset, so that all parties involved have a clear understanding.
2) You need to share similar values and have mutual respect with each other
Your brand and trust clients have in you, is by far, your most valuable asset. There’s no quicker way to harm your brand and the trust clients have in you, than to refer them to someone who isn’t up to scratch and can’t deliver what you or your clients expect.
Do some homework and conduct some due diligence on the person and firm you’re about to form a relationship with. Draw on word of mouth feedback from other professionals or from their clients. Ensure that you are confident in their professionalism and whether they have relevant experience in dealing with your types of clients and your typical client scenarios.
You can always ask to see examples of advice letters to make sure they do business the way you would like them to.
Most importantly – ‘try before you buy’ – refer one or two clients (not your best clients) and see how it goes before you enter into a bigger, longer term, formal relationship.
3) Act, learn, act, learn…..
Professional relationships are built on trust and each party doing and delivering what they have promised to do. The overwhelming majority of advisers are driven by serving their clients, and want to do what’s in their client’s best interest. The mere existence of a formal or legal agreement, with targets or fee level expectations and percentage shares, can be counterproductive or even a ‘turn off’ for some advisers. As referral relationships move to more formal joint ventures or mergers of sorts, then of course, the relationship should be documented more formally.
Furthermore, what’s more important is to get on with it, and create an environment where both parties can give their best shot at making the relationship work. All the preparation and homework in the world can’t guarantee an effective and rewarding referral relationship.
Ensure you have regular check points along the way to discuss what’s working or what could be working better. This will help you refine things, or to raise concerns if things aren’t proceeding like you expected. Finally, don’t be afraid to call an end to a relationship which simply isn’t working.
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