36 – Referral arrangements with other professionals

Referral arrangements with other providers can be great. They solve one of the key elements of the marketing puzzle: where will my clients come from?

It is difficult to find clients one by one. It is far better to find a single source of multiple clients. This is why many financial advisers have relationships with other services such as accounting or legal practices.

Referring your clients to good operators can add to the value your clients perceive that you have provided. 

But you do need to be careful. 

The first thing to try to ensure is that the other professional is reliable and trustworthy. There is no rule for how to tell if that is the case. You really need to simply trust your judgement – and to be prepared to change your judgement if the need arises. 

Remember, your client’s experience with the person to whom you have referred will reflect on you. If the other professional is not someone you would use yourself, then don’t let your clients use them. 

One thing to consider is by whom and how the approach to refer was made. If you have been approached by someone else, then there is a good chance that they simply want access to your clients. Look hard at who their clients are and try to gauge how likely it is that referrals will flow back to you. Be wary of referring to another service if you are not comfortable that referrals will flow to you as well. 

Start slowly, especially if you are referring your clients out. See if there are any or many referrals coming back the other way. If not, talk about this. Find out why. But do so before you have referred too many people yourself. 

Ensure that you always control the client relationship. Have an agreement in place that limits the work that the other professional will do, and that prevents them from referring your clients on to any other person for any other reason. Many advisers will restrict the other professional from referring to another financial adviser, but we think that it goes further than this. Say you refer to an accountant, and that accountant refers your client on to a lawyer. You don’t have a relationship with the lawyer. He or she could happily refer your client to another financial adviser and there would be nothing you can do. So, be clear: you are referring for a specific purpose and the client should remain as your client. If a referral to some third party is required, the client should be sent back to you so that you can make the referral. 

If there are payments being made or received following a referral, then disclose these to your clients. Payments influence your advice. So you need to declare them

By the way, never give your contact list to anyone else. Referrals should be made personally by you on a case-by-case basis. 

One other thing to remember: Dover can provide legal and accounting services to all of your clients, on the express understanding that we will not act with your clients independently of you. We let you control the all of the client interaction, and we do not contact your client for any reason other than the reason you have engaged us. You can even add your own premium to the fees paid by the client – we bill you, and you bill the client. It can be a simple and very effective way for you increase the fees you receive for your service. 


The Dover Group