be left to their own devices to ;nd the right
resources to achieve their goals.
Clients may also be less likely to bene;t
from the advice of independent advisors.
Large banks and other ;nancial institutions
have the advantage of million-dollar
advertising campaigns to attract people to
their proprietary products and services.
Independent advisors without the large
marketing budgets, depend on referral
relationships to be able to provide clients
with individualized service and tailor-made
solutions. If those relationships do not
provide some form of reciprocity, they are
ine;ective and unlikely to last.
We understand that the regulators are
interested in protecting clients from
fraudsters and thieves. However, these
pirates and cheats are few and far between
and it is getting more and more di;cult
for them to work inside of a highly
regulated system. Should the referral
partners provide transparency to the client
about any sort of value exchanged? Of
course, they should! And those rules are in
place today. It is up to the client, once they
understand that there is a referral agreement in place that may involve an
exchange in kind or in dollars, to decide if
they will proceed to get to know, like
and/or trust the referred professional.
Police referral agreements sternly? Absolutely! But abandon them? Absolutely not.
Removing reciprocity from the referral
marketing platform is just one more
roadblock making it more di;cult for
independent advisors to ;nd new customers and provide the range of products and
services that only an independent can
provide. And in the end, clients who are
not given the opportunity to access the
services of a circle of professionals working
together in an integral network on behalf
of the client, will be left to advice of Uncle
Bob or a Google search to ;nd a competent accountant, lawyer, mortgage broker,
realtor, ;nancial advisor.
Maria Lizak and Randy McCord are co-founders and
Executive Business Directors with National Best
Financial Network, a network of independent insurance
advisors and ;nancial services professionals working
collaboratively to empower advisors and their clients to
succeed. ;ey are also exempt market licensed with
Pinnacle Wealth Brokers. ;e opinions expressed in this
article are those of the authors and do not necessarily
re;ect those of National Best or Pinnacle Wealth
;ere are some services that
demand a high level of trust
on the part of the client.
Some professions that come to mind are: heart
surgeon, home care nurse, and, in the age of
big data and ransom ware, your IT guy. ;e
;nancial services profession is no exception.
Canadians typically do not discuss their
;nancial situation with anyone. In many
cases they will not share details with their
children, and in some cases, not even their
spouse. Giving up ;nancial information to
another individual involves a tremendous
level of trust in the relationship. To develop
that kind of relationship with clients,
;nancial advisors must be part confessor, part
number cruncher, part dream builder.
Relationships of trust are not developed using
a Google search. ;ey are almost always
developed via a personal referral.
;e entire ;nancial services industry has been
built using referral marketing techniques. Yes,
certainly there are service companies that
require their rookie advisors to open up the
phone book and start making cold calls, but
as most marketers will tell you, that is a slow,
tedious and ine;cient way to develop
;ere are libraries full of books explaining
how referral marketing is one of the most
e;ective ways of building a business, particularly in ;nancial services. Ideally, referral
partners know each other’s areas of specialty
and direct clients to their ideal professional,
one who will provide an exemplary level of
service. Introductions from these kinds of
referral partnerships help to establish a “know,
like and trust” with the clients.
Referral partnerships are also built on trust.
For the sake of the client and for the sake of
your own reputation, it is important to
ensure that your referral partners are working
to their highest standards and providing
exemplary levels of customer service to your
clients. ;is provides a measure of accountability that improves service levels to clients.
You can be sure that if a client is not served
well in a referral relationship there will be an
instant reckoning and someone to advocate
on behalf of the client.
When my husband and I (Maria) were
buying our ;rst home, the real estate agent in
the show home asked us if we were already
working with a mortgage broker and a
lawyer. When we asked who she would
recommend, she provided us with the
names of professionals she trusted to get the
deal done. ;is saved us time and the
anxiety of choosing someone ourselves, as
we had no idea where to start. If we had any
di;culty or concerns with either the
mortgage broker or lawyer, we would have
gone back to the realtor and she would have
advocated on our behalf, as her reputation
and her own commission would be at stake.
In addition to trust, referral relationships
must be based on reciprocity. In some
instances, this reciprocity may be achieved by
mutually referring clients back and forth.
;ese types of referral relationships take a lot
of work to maintain, as anyone who has
been a part of a formal networking group
will attest. In other cases, referral sources may
be paid for the referrals they make.
In our opinion, compensation for referrals
allows for multiple referral agreements
between professionals and a greater variety
of possible referral options for clients, since
advisors do not have to limit ourselves to
partners who can reciprocate with referrals
of their own. Ongoing ;nancial compensation for referrals between ;nancial professionals also encourages advisors to specialize and refer clients outside of their areas of
expertise to other ;nancial professionals.
Here’s an example of this process at work.
Say there are two colleagues in an o;ce,
each of whom are life and exempt market
licensed. To better serve their clients, they
come to an agreement that they one will
focus on life insurance solutions and the
other will specialize in the private markets.
To make this referral agreement completely
equal, they must agree to share the
commissions paid on the transactions
50-50. Any other arrangement would see
one of the partners have an advantage and
ultimately cause a breakdown in service to
the client. When there is perfect reciprocity, the client wins.
A Caution to the Regulators
We are concerned about the recommendations being considered by regulators in our
industry. ;ey are looking to limit
monetary compensation for referrals
between ;nancial professionals. We believe
this would be a mistake and ultimately
would do clients a disservice, as they would