Off the back of our article about limited license accountants, it makes sense to have a two-way cross-pollination of clients, through referral or partnership, between “specialist” firms covering areas like advice, accounting, legal, and mortgage broking. This was generally a well-travelled path within the industry until the FASEA code of ethics emerged and challenged its legitimacy. How timely then that FASEA released its draft Financial Planners & Advisers Code of Ethics 2019 Guide on Monday following 12 months of industry consultation.
While Standard 3 around conflicted forms of payment always attracts the most interest, our attention was drawn to the matter of referrals between adjacent businesses covered under Standard 7. While we are not experts in this field nor industry practitioners, it seems referral relationships can survive when properly structured at the licensee or CAR level and is demonstrably in the best interests of the client.
The draft code is only two days old but already there are rumblings that the clarifications and modifications don’t go far enough. Is this a case of more sour grapes from advisers about rules appropriately established to clean up the industry and drive it towards professionalism? Or legitimate concerns that the constraints are truly inequitable, over-reaching, or there still isn’t sufficient legal certainty about how to operate their businesses that advisers are demanding.
Lead Generation
While referrals help provide clients with full service and improves retention through leveraging a community of professionals, they are also about lead generation. Depending on which study you believe, and what industry you’re in, acquiring a new customer is anywhere between five to 25 times more expensive than retaining an existing one.
We polled 100 advisers on their attitudes towards lead generation, without differentiating between sources of leads that include referrals and opportunities generated from more traditional forms of marketing and advertising.
Source: Adviser Ratings survey of 100 financial advisers, Dec 2019
Source: Adviser Ratings survey of 100 financial advisers, Dec 2019
The evidence shows that the majority of advisers are willing to pay for leads, with a strong preference for qualified customers. This should only become more pronounced as businesses continue to specialise and can’t afford to waste time with prospects that don’t fit their model. The most qualified leads arguably come from referrals. Therein lies the challenge – building good referral relationships between other professional firms that benefit firstly clients but also advisers – while honouring the intent behind the FASEA rules.
We hope for the sake of unadvised super fund members and SMSF trustees that the industry works it all out.
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Comments1
"What if this is all getting too hard, I refer all my clients to a new adviser- who pays me an agreed fee for the right to service those clients from now on? In the past it was called selling your business, but what view does FASEA take on this one? Where will this end?"
Sean 15:52 on 07 Oct 20