One of the areas of greatest concern for advisers is finding new clients, according to a survey by Schroders, and word of mouth is key to finding an adviser.
Separate research for LV found three in 10 people found their adviser by speaking to friends, family or colleagues. Others found an adviser through their employer, estate agent, solicitor or accountant.
Just as relationships should be maintained to conserve clients, links with referral partners should be nurtured to grow a client base.
A good referral partner is there to support the business that makes the introductions, says Jason Ruse, business development director at Key Partnerships, the equity release referral arm of Key Group.
Ruse says it is important for advisers who are selecting a partner to which they will pass referrals to ask a few questions to be sure they are comfortable working with them:
- Are they independent?
- What sort of customer experience do they offer?
- Do they take compliance responsibility for the advice they provide?
- Do they have dedicated support teams?
- How many field advisers do they have?
- What level of commission will the introducer receive and how is it paid?
Identifying gaps in an advice proposition is therefore one way to put yourself forward to receive referrals.
Mortgage broker Alexander Hall, for example, partnered with Skipton Building Society in April to refer its clients to Skipton for advice on pensions and investments where needed.
Protection is another example of a product where referrals are encouraged in a bid to address the so-called protection gap.
Anna Glod, founder and managing director at Umbrella Protect, agrees that positioning yourself as a partner to receive referrals is about complementing the business that is making the client introductions.
After finding that one of her first clients did not have life cover despite being the sole income earner in the family, Glod began speaking to mortgage brokers and working with networks such as Connect for Intermediaries, which appointed her company to its panel last year.
“Many mortgage advisers don’t feel comfortable giving protection advice because it requires a different mentality to arranging a mortgage, which is a feel-good sale. They don’t like to have the uncomfortable conversation, either at the start to sell the policy or when the client needs help making a claim,” says Glod.
“Many mortgage advisers are also just too busy. So referring the client to someone who has both the time and the expertise to talk about protection is essential from a client point of view, as it gives the client the opportunity to get that crucial advice.”
As well as reaching out to potential partners by email and over the phone to establish referral agreements, Glod facilitates referrals by raising awareness on the importance of protection through training and webinars for advisers.
“When we have a close relationship, such as with Connect, we then carry out ongoing training with the brokers themselves on how to have initial conversations with their clients and the best way to refer them across,” says Glod.
“We have created a learning module for new mortgage brokers joining Connect, as well as ongoing training for existing brokers.
“The reason for this is that the mortgage broker or IFA still has to start the conversation and pass it through to us. They still need to educate the client on why protection is important, and make the client aware of why they need it and then pass it through [to another advisory business], so the ongoing training helps them to do that.”
Key Partnerships’ Ruse agrees that the most successful referral partners have a good understanding of the products they are looking for support with.
Once the introduction is made, advisers who refer clients can choose their level of involvement, Ruse says, from taking a back seat to attending client meetings.
Glod also stresses the importance of having an introducer agreement in place, so that both sides understand what the commitment is.
“It is important for the broker that they know what is then happening with their client, so we have invested in an introducer portal where the introducer can log in and see live updates on the case,” says Glod.
“They add the lead to their portal, so they can see what’s happening at all times. They will see what’s been sold and how much commission they have earned, so they are fully informed at all stages of the process.”
While referrals can be an important source of new clients for the receiving company, it is worth highlighting how they can be a win-win for both parties to get a foot in the door.
Glod says her company usually pays between 20 and 30 per cent of its total commission to professional introducers.
For advisers who are sharing their clients, having a trusted referral partner can enable them to support a wider range of clients, strengthen client relationships and generate a significant additional revenue stream, says Simon Gray, managing director at later-life adviser Hub Financial Solutions.
“To show how much this could be worth, let’s assume an adviser doesn’t provide advice on equity release but typically receives a dozen enquiries a year,” Gray says.
“If all of these clients were to take out a lifetime mortgage as a result of advice given by the referral partner, with an average introducer fee of around £1,300 per case, this could generate more than £15,000 in extra income each year.”
Compliance is another potential benefit for advisers sharing their clients by way of referrals.
“On every mortgage application suitability letter there is a paragraph about protection so the broker cannot miss it out. So what are brokers putting in their letters if they are not talking about protection and not referring to third-party specialists?” asks Glod.
“Even in the technologically advanced world of 2021, word of mouth is still king,” says Ruse. “Referrals lead to more clients, who then in turn can create more referrals – it is a huge and growing opportunity for advisers.”
Chloe Cheung is a features writer at FTAdviser
