Referral relationships are one of the most common ways in which planners and accountants can work together for mutual business benefit. However, it is important that the process of establishing such relationships be approached in a systematic way to increase the likelihood of success for both parties.
I see many people enter into these relationships as a result of a discussion over beer, and it all sounds great at the time, but in the process they often skip over the fundamentals of establishing such relationships.
The first step is to develop a clear understanding of the reasons why the accountant and planner are looking to establish a relationship. In some instances it’s potentially for revenue sharing, in others it’s about growing the number of clients they have (especially for advisers) while accountants might be looking to establish relationships with planners they know they can trust to refer their clients onto in a controlled manner.
The next step is to understand the type of relationship they are looking to establish, whether it be a centre of influence relationship, a more formalised joint venture or potentially for merger purposes down the track.
The third step is in understanding the type of business partner they want. So if you’re a planner, I need to understand what kind of business you have, your client base and a number of other points in order to identify the type of accountant that would be relevant to your need. This helps in narrowing down the list of potential matches for both parties.
One of the challenges at this stage of the process is establishing the right personality match. So before making introductions, we put three or four options on the table for both parties. While these options might meet the criteria of both the accountant and planner, it’s important to establish a personality match as they obviously have to work together and get along with each other.
We usually recommend shortlisted parties initially meet over a coffee, and you usually get a good sense of whether the conversation is an easy one or not from there. Out of this, both the planner and accountant will ideally identify one party they are happy to proceed with.
Following this, we always recommend having a trial arrangement in place, in which maybe a half a dozen clients are referred over a three or six month period. Assuming it all goes well, both parties then enter into an appropriate ongoing relationship, with the most common being a typical referral arrangement, potentially with income sharing or a more formal joint venture arrangement.
In my next blog, I will talk about the importance of communication, managing expectations and how to make referral relationships work in the long-term.
