Teaming Up for Success

Working with others requires a careful balance of give and take. Follow these steps to make the most of your professional alliances.

By Dave Willis

It was 8 o’clock on an election night, some 18 years ago, when advisor Kathryn Soderberg, a Republican, sat down across the table from a Democrat—an Hispanic Democrat who ran a home-based business. Their task was simple: Count and recount ballots cast in Lynnfield, a small Boston suburb that’s home to Soderberg Insurance Services.

Soderberg, a blonde woman with a Swedish last name, saw the event as a way to give back to her community. But while she counted, she formed what would become a lasting friendship with the woman on the other side of the table. Today, that woman is a real estate professional with a booming business, who regularly recommends that homebuyers get their insurance from Soderberg.

This was the first in what would become an ever-increasing network of professionals who’ve helped Soderberg, a Boston AIFA member and agency president, penetrate Hispanic markets. “I’ve created an army of people who support the agency,” she says. This includes accountants, attorneys, mortgage brokers and other professionals who see Soderberg, a CPCU, as a trusted resource, and whom she considers friends.

Insurance advisors haven’t always called accountants and attorneys friends, though. “Traditionally, people in risk-based financial services viewed attorneys, accountants and trust officers as adversaries,” says Southern Maine AIFA member Philip Harriman, CLU, ChFC, a partner in Falmouth-based Lebel & Harriman. “Oftentimes, they were the reason cases slowed down or were rejected by the client.”

Turning the tide
Harriman enjoys alliances with a range of advisors—fellow AIFA members who specialize in certain disciplines, as well as attorneys and accountants. “Part of my firm’s success comes from collegial, almost collaborative relationships with other advisors,” he says. These are generally informal. But informal doesn’t mean without foundation.

Several overriding principles guide Harriman’s business. One that he uses with his clients goes something like this: “If we can’t gain the confidence of your other advisors, we shouldn’t proceed with your plan. We shouldn’t put you in a position where you must decide between conflicting advice you get from your advisors.” Sharing this principle sounds like a rather daring move on Harriman’s part, but it works.

Here’s proof. In the early 1990s, Harriman was referred to a small business that was co-owned by several family members. Employees held a minority stake through a company-benefit program. The family members—brothers and sisters—were approaching the age when visions of retirement danced regularly in their heads.

As Harriman met with one of the brothers—the youngest, he recalls—he learned the family had an agreement that if one left—through retirement, death, mid-life crisis or whatever—the remaining siblings would buy his or her shares. Harriman looked at the agreement and found a problem. The pact allowed for a buy-out all right, but it was the employees—not the siblings—who would get the shares. This would leave the employee stock-ownership program the majority shareholder.

The client called his attorney, asking him to meet with Harriman. The lawyer acknowledged Harriman’s analysis and set in motion some changes, including a recommendation that the owners increase their life insurance by a million dollars, since the value of the company was inadequate. Harriman got the business. “The case blossomed,” he says, “and now the client and law firm eagerly mention my name to other potential clients.”

Strengthening ties
Other advisors use more structured relationships. For example, Neal Slafsky, CLU, ChFC, CFP, president of Capital Planning Group in Ft. Lauderdale, Fla., ran the financial-services operations for a regional property and casualty brokerage for years. In the late 1990s, a Miami accounting firm seeking to get into financial services—but not interested in having its CPAs become planners—approached Slafsky. “I was asked to write a business plan, and that business plan became a company,” he says, when the accounting firm bought half of his operation. Still, Slafsky maintains less formal relationships with other advisors, especially attorneys.

Edmond Walters, a financial advisor for 18 years and now CEO of eMoney Advisor, a technology-based service provider in Conshohocken, Pa., believes formal alliances are the way to go. “If you’re going into this arena, go into it with your heart over the wall,” he says. “Create a formal agreement. Deal with all the issues, for example, who owns the client, how often you communicate with the client, how each other gets paid, or how you’ll deal with unhappy clients.”

Recipe for success
Many advisors heed his advice. But whether they do or not, all seem to agree that people in successful alliances follow several common steps:

1. They network feverishly.
First, Soderberg says, is a passion for networking. She belongs to a couple of organizations that put her in constant contact with potential partners. One is ALPFA, an association of Hispanic CPAs. Another is Business Network International. Soderberg recommends pursuing networking opportunities that center on business issues, not just social ones. Doing so offers double benefits—networking and education.

Networking isn’t a one-way street, though. Soderberg says, “I don’t just sop up referrals. I give them, too. When you give, it comes back to you.” That may not always be the case, but it doesn’t deter Slafsky. “One of the most important things is being a good resource,” he says. “And don’t immediately expect business back.” Still, he says, if advisors want good reciprocal relationships, they should recognize the importance of being a resource to others.

2. They understand differences.
Those who understand successful alliances also note that all advisors are not created equal. Accountants don’t think like attorneys. Attorneys don’t think like insurance advisors, and so on. Value the differences. Walters says, “The advisors who are doing the fantastic job are those who’ve gotten out of their comfort zones and studied and learned what the partner really needs.” This requires a number of things: regular contact, extra-curricular reading, some basic education in other disciplines and an appreciation of what others can contribute.

For example, Walters describes how one firm works with accountants. When they deal with CPA firms, they use the lingo of CPAs, he says. “Living 1090s. Living W-2s. Instead of pushing their own vernacular, they communicate in the world where the other advisor is comfortable,” he adds.

Differences go beyond semantics to include business operations. A financial advisor’s business model does not necessarily fit well with an accountant or attorney. That’s especially true when it comes to the client. When advisors share clients, they should address issues like payment, measurables and accountability early on. “Insurance guys typically come in thinking commission,” Walters says. “Accountants and lawyers are thinking fees. And all of them are concerned with protecting the relationship they’ve cultivated over time.” What it really boils down to is being able to get in the other advisor’s shoes.

3. They build on trust.
Good alliances feed on trust. Soderberg says if she can prove her stripes every day, it comes back many, many times over. Slafsky talks of a triangle of trust. “Customers trust their accountant, the accountant trusts us; therefore, the client should trust us,” he says.

These trust relationship can get you in front of another advisor’s clients. Then you have to do good work, Slafsky adds. Harriman says this calls for honesty and professionalism. “You should tell people what they need to know, not what they want to hear,” he says.

Slafsky says it’s important, when a fellow advisor calls, to not just give an answer that would set you up to sell something. Instead, give an unbiased answer. “The more they trust they’ll get an honest answer, the more often they’ll call,” he says. “Then, when a case does cross their desk, you’re the person they will think of. People would rather deal with people they get straight answers from.”

Trust is fragile. One of the quickest ways to blow it—and kill alliances—is to discount a referral’s value. “Remember, the person who brought you in is the one who’s in control,” Harriman says. “If you don’t respect and honor that, you’ll lose not only that case, but the relationship, too.”

Be realistic
Successful alliances require appropriate expectations. For instance, advisors sometimes invest in relationships with CPA firms or law firms, expecting quick financial payoff. That’s not necessarily how to gauge success. “The measurement isn’t on commissions,” says Walters. “And it’s not on fee revenue. It’s on access to their clientele.”

Advisors even overestimate this access. They think, “This guy has 1,000 clients. I’m going to get access to all 1,000.” Not so, according to Walters. “You’re only going to get to clients who have a bad advisor,” he says. No matter what the discipline, it rarely makes sense to shift clients for the sake of an alliance. “CPAs, attorneys and other investment advisors aren’t going to throw out existing financial advisors, unless the existing ones are weak,” he adds.

Earn from learning
Sometimes the benefits of an alliance come slowly. And sometimes they show up when they’re least expected. Slafsky speaks of his bond with one attorney in particular. “He and I will chat about advanced techniques and concepts all the time,” he says. “In every conversation I’m learning something.” But that knowledge doesn’t necessarily relate to an existing client or case.

More often, it’s delayed gratification. “I can’t tell you how many times in my career that what I’ve learned in those informal conversations over a cup of coffee has made me thousands of dollars,” he says. “There have been literally hundreds of situations where I’ve used what this attorney has taught me.”

Pitfalls to avoid
In addition to knowing what works, advisors who understand the ins and outs of strong alliances know what to avoid, as well. Here are some steps you should not take if you want to build and maintain a successful alliance.

1. Don’t sit around.
Soderberg warns advisors not to be passive about relationships. “You have to find and make connections, then work on them to get the relationships going,” she says. Perseverance is key. You can’t just go and expect things to fall into your lap. “You have to continually follow up with people with whom you click,” she adds.

2. Don’t assume anything.
Advisors should also not leave any details to chance, according to Walters. He says alliances will not work unless the relationship is ironed out and crystal clear up front. “Advisors who are jumping into this, saying, ‘Let’s get this cross-selling opportunity and cross-pollination of advisors’ had better be really careful,” he says. “If they don’t do it right, they’re wasting their time. I have seen a million of these things fail.”

3. Don’t criticize others.
Alliances aren’t a way to play “gotcha,” says Harriman. “It serves no one in our industry to go in and criticize past decisions, behavior or recommendations of advisors who’ve come before them,” he notes. “It just deepens frustrations. Also, it’s quite possible that you may be insulting the very person who brought you into the case.”

For instance, the accountant or attorney may have been aware of the transaction when it happened, but didn’t know enough about how the product worked to intercede. By association, the client may be asking the attorney or accountant, “How’d you get me into this mess?” Focus instead on solutions, not accusations, Harriman advises.

4. Don’t be stingy.
Advisors should also not waste their time and energy on trying to keep track of who has put what into the relationship or by withholding referrals until the score is evened. “Givers gain,” Soderberg says. It all tends to even out in the end.

Going further
Finally, the return on an advisor’s investment in good alliances sometimes extends beyond the sharing of clients and the added commissions this access can generate. Harriman, for instance, has been able to parlay his good work and professional advice into added fee income in a couple of areas.

First, when clients go in to see their attorney or accountant, perhaps for estate or business planning, the issue of existing life insurance, annuity or retirement plan vehicles in the clients’ portfolios often surfaces. “Attorneys and accountants are quick to recognize that they don’t know what they don’t know,” Harriman says. So they bring him in on a retainer basis to analyze the contract’s performance. They ask him to assess what the particular product is likely to do in the future, most often in relationship to what the client has been led to believe it will do.

“In the past, financial advisors used to do this kind of work free of charge, hoping they might get some additional business in the future,” he explains. He charges for the time spent reviewing and analyzing the portfolio, just like the attorney or accountant charges for his unique abilities and special expertise. Generally, if a client must make a change based on Harriman’s analysis, the original resource usually handles it. Sometimes, if that resource is not in the area, or, as Harriman puts it, has vanished from the business before the premium did, it’s easy for the other advisors to refer the clients to him.

A growing number of registered investment advisors are also inviting Harriman to work with them. They work with clients who have significant portfolios of securities and who are being urged by other advisors to transfer some of their assets into a life insurance policy. These investment advisors use Harriman to check assumptions and determine whether the client is being offered an appropriate strategy. “Because life insurance products are often very specialized, it takes a specialist to understand and service them,” he says. “Someone who needs brain surgery isn’t going to go to the emergency room doctor who specializes in sewing up lacerations.”

It's all about the customer
What Harriman has found tracks with what other advisors believe: At the end of the day, alliance success is measured on how well the customer is served. Walters sums it up like this: “Clients don’t necessarily want just one person watching their accounts. If one person messes up, where are your checks and balances? The client wants the whole team on their toes.”

Dave Willis is a New Hampshire-based business freelance writer and a regular contributor to Advisor Today.