Why financial advisors don’t get referrals from CPAs
January 16, 2015 by Anton Anderson
There is a common misconception in the financial planning industry that CPAs need and want to refer their clients to financial advisors. Although it is true that their clients have needs that financial advisors are the best positioned to help with, the referral model is an unattractive option for CPAs, and as a result, very rarely works as well as financial advisors are lead to believe.
Let’s consider a few reasons why this is:
It’s risky
As soon as a CPA gives their client the name and phone number of a financial advisor, they are exposing themselves to an enormous amount of risk. What if the advisor is having a bad day and upsets the client? What if the advisor makes a bad recommendation and loses the client money? These are just a few of the reasons why the American Instittue of CPAs (AICPA) no longer encourages their members to give referrals.
There’s isn’t a great risk/reward ratio
Ask yourself this question: If you were a CPA and the risk of referring your clients to financial advisors was an upset client or potential lawsuit, and the reward was that you maintain status quo, how many referrals a week would you give? Even if your client likes the advisor and follows their advice, your only reward is that you maintain your relationship with the client. If that was my risk/reward ratio in giving referrals, I certainly wouldn’t be actively looking for opportunities to refer my clients out.
There’s lack of organic growth
Let’s assume the advisor’s plan is amazing and the CPA’s client is happy. When that client is telling their friends and colleagues about the work, are they bragging about the CPA or the financial advisor? They are bragging about the advisor. That’s great for the financial advisor, but where’s the value for the CPA? If I made the choice to expose myself to additional risk, I’d at least want to know that if all goes well, my client would be helping me get new clients by talking about me to their friends and colleges, not the advisor.
Although CPAs have more demands and expectations on them than ever before, as pointed out in numerous articles, financial advisors need to be smart in the way they help CPAs with their clients’ needs.
Put yourself in the CPA’s shoes, and ask yourself how excited you would be to refer your clients to an advisor. The honest answer is “not very.” When building relationships with CPAs, an advisor must focus on putting the CPA’s needs before their own and use a model that truly helps the CPA increase the value they are delivering to their clients, while simultaneously reducing their own risk and increasing their organic growth. Until that is your value proposition, I’m afraid your results will be a fraction of what they could be.
