Bad structure sours relationships

Too many business relationships between financial planners and the accountants who refer clients fail due to poor structure of the relationship, says Shirlaws partner Chris Dionne.

Too many business relationships between financial planners and the accountants who refer clients fail due to poor structure of the relationship, says Shirlaws partner Chris Dionne.

Dionne told the recent FPA Roadshow that the relationship with the accounting practice which refers clients is one of the most critical ingredients for a growing business and fails too often because of poor management of the relationship.

He says financial planners often ignore potential mismatches between their own businesses and that of the accountants.

“Identifying the areas of conflict or limitations lays a strong foundation. If a finan-cial planning business can not handle a large number of clients once the accountant ramps up the referrals, then perhaps the two businesses are not well suited,” Dionne says.

The other big error often made is that financial planners try to sell their skills to ac-countants who often respond negatively to this form of selling.

“I often ask accountants what they think of the initial presentations of the financial planners they are considering for referrals. A lot of the time they feel they are be-ing sold something which they do not respond well to,” Dionne says.

These two factors mean that building a relationship with accountants can often take three to five years to be running successfully and there are many relationships that end up unsatisfactory for both sides. However, Dionne says if the appropriate groundwork is done, the relationship may flourish in a short time.

“The first step is a fact finding mission. At this stage, both parties need to confront any fears they may have over the relationship including trust, control, consistency and the time committed to the relationship,” he says.

“Steps two and three involve both parties conducting a show and tell type of tour through each business. I liken this to the way you would show a new employee around the business to make them comfortable with the surrounds, the people and the way the business is run.

“Finally, it is imperative agreements are drawn up to formalise the relationship. The agreement should include a clause that both parties meet to review the rela-tionship each quarter.”

Dionne says the relationship with those refer business to you, which he says is a key “distribution source”, is but one of a number of “platform issues” that needed to be addressed by financial planning businesses that are looking to grow.

He says financial planning businesses often hit a wall which can retard a business. Unless platform issues such as relationships with distribution sources are resolved, growth can be halted for five to seven years. Other critical platforms that need to be addressed include systems, positioning, functionality and succession planning.

“The earlier these issues are addressed, the smaller and thinner will be the wall,” Dionne says.