How to Manage CPA Relationships

Philadelphia: “I’ve been conducting CPA workshops for CE credits for a number of years,” Mark explained with a pained expression, “but have yet to have to develop any type of referral alliance relationship.”

Are you surprised? Probably not. This is a common challenge facing financial advisors. CPAs need ongoing continuing education credits, somehow – someway, financial advisors are allowed to present specific workshops that meet the CE requirements, and CPAs attend. Although this can get you face-to-face with CPAs, it can be light years removed from developing a healthy working relationship.

Developing a healthy CPA referral alliance requires much the same strategy and tactics as romancing an affluent prospect into becoming a client. Seminars don’t make the cut, and even though CE courses can get advisors like Mark in front of CPAs, left on their own they do little in terms of managing any type of relationship.

This might seem a bit daunting at first glance, but the following is the secret sauce for managing CPA relationships (actually it’s rather simple)…

• Step 1: Create a Profile for each CPA – Here is where you begin to compile both personal and professional information. Your objective is to gather as much intelligence about each CPA that will enable you to follow-up with each on both a personal and professional level – without coming across as a bore, or worse, a broker.

There are many ways to gather this information, but essentially you want to know their areas of expertise, colleges attended, types of clients, mutual clients, marital status, spouses interests, and so on.

We have a simple profile form that our clients use to compile this new-found intelligence – but you can easily create your own. The key is to have a system you will use.

• Step 2: Ask Around – Word-of-mouth influence is the #1 tool used by the affluent and potential referral alliance partners and you want to use it carefully in your quest to gather information about a CPA you’ve targeted. Contact your mutual client, a COI or whoever is associated with the CPA and ask a few subtle questions. Much like selling to the affluent, this is an art form that requires finesse. You don’t want to come across as mechanical or overly nosey, rather you want to leave the impression that you’re naturally curious.

Think of information along the lines of; how long they have worked with this CPA, what they might know about them on a personal level (hobbies and interests), what they like best working with them, and so on.

• Step 3: Conduct Online Reconnaissance - With so much personal information available online it is foolish not to take advantage of it as you work on gathering background intelligence on your targeted CPA. According to Kevin Nichols, our resident Social Media guru, LinkedIn is your most effective tool for getting started.

Kevin suggests start by running an advanced search for CPAs in your area. Your objective is to gather information based on their profile, and at the same time you can also look for mutual connections.

• Step 4: Use the Information – Gathering intelligence is one thing, using it intelligently is another. At this stage you had best be careful. The last thing you want is to spook the CPA you’ve been working so hard to manage the relationship. You never want a CPA thinking, “How did he know that?” Ugh!

Much like asking clients and COIs questions, finesse is the key. Once again, this is an art form that requires social skills as well as sales aptitude. In essence, you will effectively manage each CPA relationship by blending both into part of your natural style. Which of course, requires the first three steps to be completed.

How to Frame a Healthy CPA Referral Alliance

Kansas City: “It seems as though it is getting nearly impossible to establish good CPA referral alliances, groaned Ed, then adding “I’ve been conducting CE courses for CPAs for nearly three years, but haven’t got a referral from any of them.”

In many ways, developing a healthy CPA alliance is similar to penetrating affluent centers-of-influence. How so? Both the affluent and CPAs have been overly solicited by financial advisors, and albeit for slightly different reasons, both groups are leery of the world of financial services.

The following steps have evolved from our research and have been successful in developing healthy CPA referral alliances when properly applied.

1. Identify specific CPAs you would like to work with.
2. Gather some background information on each to assist in developing rapport.
3. Contact the CPAs you’ve targeted by a telephone call or face-to-face interaction.
4. Officially meet face-to-face with the sole objective to develop rapport and uncover a reason for a follow-up face-to-face.
5. Send a summary document (email, note, etc.) that provides an overview of your initial meeting and reminds of your upcoming 2nd face-to-face meeting.
6. Officially meet face-to-face a second time with the objective to strengthen the relationship.
7. Manage each relationship by staying in touch and treating each targeted CPA as if they were an affluent prospect.

There is no miracle presentation that will carry the day and qualify you in the mind of your targeted CPA as worthy of referrals. It’s all about developing a relationship on a personal level. Once a CPA gets to know you, determines that he likes you, and feels as though he can trust you, then and only then have you created a window of opportunity for developing a healthy referral alliance.

I’ll be diving into these topics in upcoming articles, but this is a good framework for getting started.

Gaining Bandwidth: Re-engineering Your Book

*The following is from Registered Rep. Magazine's Practice Management Newsletter.

Philadelphia: “I really don't think it’s fair to treat clients differently, so I provide the same level of service to all my clients,” Marty explained. “But I’m really swamped –- I’m beginning to think that I’ve got to change something.”

Marty is dealing with an issue that I’ve been talking about since writing How to Build a 21st Century Practice nearly a decade ago -- client segmentation. Every financial advisor has only so much bandwidth, so much client service capacity. One of the many revelations financial advisors have experienced as a result of this Category 5 financial tsunami is the time and attention smaller clients require when they are scared about their financial well-being. Throughout this crisis, whenever advisors are asked which clients are calling in the most, the answer is always the same: smaller clients.

As I explained to Marty, every client should get the service they pay for and a little bit more. Every client! To that end, I’m a client advocate. However, rarely do advisors find themselves with too many clients because they are taking a personal interest in serving every client. The reality is that it’s such a challenge to acquire clients in those first few years, the industry has inadvertently conditioned advisors to collect clients. In our heart of hearts we all know that collecting clients isn't about service, it’s about our own insecurities.

So here is the 5-Step Client Re-engineering Process that we coach advisors to follow for gaining bandwidth:

1. Conduct a Net-Profit-Contribution Analysis for every client on the books. This is a simple inventory process where you assess four criteria:

* Annual revenue generated;
* Assets on the books;
* Potential revenue (assets held elsewhere, other financial solutions that could add value and fully monetize the relationship);
* Center-of-Influence (ability to introduce you to affluent friends, colleagues, family members, or clients).

If a client meets any one of the aforementioned, they are classified “above firewall” and labeled accordingly (R-revenue, A-assets, P-Potential, COI-center-of-influence).

2. Determine the appropriate actions for clients who are above firewall. For example, Marty had a few clients with a lot of assets but generating no revenue; his objective was to upgrade those clients into profitable revenue generators. He also had two CPAs and an estate attorney who are centers-of-influence but not clients; he decided to schmooze them as if they were top clients.

This firewall exercise also involves assessing the service your best clients have been getting. In Marty’s case, he wasn’t providing them the time and attention they deserved because he was swamped dealing with his smaller clients.

3. Identify the clients who you have classified as below firewall. These are clients who by your own calculations are generating minimal to no revenue, have no potential, and are not centers-of-influence. This is what’s clogging your bandwidth.

4. Determine what path you are going to take with clients that are below your firewall to gain bandwidth:

- Sever the relationship completely (give them away);
- Get another advisor to service these clients for a revenue-sharing arrangement;
- Bring a junior advisor onto your team to service these smaller clients;
- Give these clients to your firm for servicing.

Whatever path you take will be determined by a number of variables: your broker-dealer of record (some of the larger firms have service centers where advisors can park smaller clients), your access to junior advisors (whether in your office, your firm, or your community), the quality of these junior advisors (must be honest, hardworking, and competent), the willingness of a quality junior advisor in assuming the servicing responsibilities of your smaller clients (a newer advisor in a serious growth mode is usually a good fit), whether you feel the need for a junior advisor on your team; and finally and of most importance, which path will accelerate your long-term growth.

Marty was mentoring a newer advisor and after much consideration, he opted to give these clients away to this individual. Initially he wanted a shared-revenue arrangement, but he realized his continued liability (name remaining on statements) wasn’t worth the minimal shared revenue he’d receive, wouldn’t really gain bandwidth, and therefore wouldn’t fuel his growth.

5. Communicate with each client and inform them of the path you have selected in step four. Like many advisors, Marty opted for a combination that involved a personal phone call to a select number of clients with whom he had a personal relationship, while sending a letter to the rest.

Incidentally, I made certain that Marty understood that even though he would be signing his name to this letter, the junior advisor who was receiving these clients would write it with a post-script that read: If you have any questions feel free to call "Junior Advisor" at 888-123-4567. (The idea is for Marty to spend as little time as possible giving these clients away.)

Marty's initial reaction was like that of many advisors; he was full of guilt and resistance. It was only when I got him to admit that these clients would be served better by the advisor he was mentoring that he consented to take the plunge.

With only 29.9 percent of advisors increasing the personal time they are spending with their affluent clients during this crisis, and with the preferred medium of communication of today’s affluent being face-to-face, advisors need to be very aware of their bandwidth.

One of the reasons New World Advisors, today's elite, are in a growth mode is because they have the bandwidth to spend time with their top clients and to penetrate their affluent centers-of-influence.