When it Makes Sense to Refer Clients to Other Practitioners

By Bryce Sanders

You do a lot for your clients, and you know it. You could do lots more if they are receptive, as List of 18 Reasonable Client Expectations explained. It’s not a one-way street. What Accountants Should Expect From Their Clients highlights where they must step up.  

Are there other ways you can help? Yes, but here’s the challenge: You see the problem but can’t help them directly. You need to refer them.

As a member of the accounting profession, you are in a unique position. You both serve and are seen as a fiduciary. Clients pay for your advice in addition to tax-preparation services. Investments and insurance are sold by a person paid based on products the client buys. Although this usually meets the suitability standard within the financial services industry, clients (and the US Department of Labor) see a potential conflict of interest.

Who Should You Refer?
When would a referral be appropriate? When the expertise needed is outside the range of your practice. You will need to know several trusted practitioners in each category because you want to offer your client at least three names. Let him or her choose. Explain there are no finder’s fees or revenue-sharing arrangements.

Here are five obvious categories where referrals might be appropriate:

1. Financial planning. Your client has a need exceeding the scope of planning offered through your firm. Many practitioners have earned the Certified Financial Planner (CFP) designation. Your client can get a personalized plan purchased as a standalone project. The client can implement plan recommendations anywhere. Many CFPs operate as fiduciaries and work on a fee-only basis.

2. Financial advisors. Your client inherited money. She needs income – and advice. Product pricing can be complicated. The data is out there, but the client really needs to dig for it unless she has an ethical advisor who can explain “this is how we make money …”

3. Insurance agents (1). There is a place in many clients’ lives for life insurance and annuities. Although term life insurance is popular and inexpensive, the term might expire at an age where the client might face significantly higher premiums to continue the coverage. Fees and costs are often in the news. You need to know a few agents who are knowledgeable enough to determine the specific type of coverage the client needs.

4. Insurance agents (2). The person selling life insurance or annuities might not be licensed for health, auto, home, or personal liability insurance. Health insurance is extremely confusing, but you must have it, especially as you get older. You need experts in this category.

5. Lawyers. Your client might require a special-needs trust. He might be philanthropic, requiring a charitable remainder trust. You need some specialty attorneys who understand estate planning or caring for children with special needs.

Additional Categories
Business owners have special needs of a different sort. Does your accounting practice do business valuations? Can you market and help a client sell his business? If not, you need some outside experts.

Realtors are another service clients might need, especially when selling inherited property.

What Makes Someone Referable?
As a CPA, you are likely contacted by plenty of financial advisors and insurance agents who would like to develop a referral relationship. When you send a person elsewhere, you’re handing control to another. If they mess up, it can poison your relationship with your own client.

Years ago when financial advisors referred mortgage business within their organization, tales abounded of frustrated clients who had problems with the process. They sometimes retaliated by closing their investment account, which punished the advisor.

So, what do you want?

1. Good reputation. They are experienced. People in town speak favorably of them.

2. Credentials. Licensing is only part of the process. It helps if they hold professional certifications in the areas of expertise the client requires.

3. Solid firm behind them. When clients put their money someplace, they are concerned about losing it. They sleep better if there is a large firm’s name on the door.

4. Clean regulatory record. It’s so easy to check! Expect they will. Are they ethical? Do they explain all fees and charges? Perhaps other clients have worked with them. Are they transparent about fees?

5. Quality of service. Do they have a good “bedside manner?” Do they explain concepts simply? Do they keep in touch with clients?

How Can Referrals Blow Up?
You’ve heard the horror stories and how the well-meaning provider of the referral got egg on their face.

1. Dropped the ball. No contact or follow through. Your client called. Her call was never returned. An appointment never happened.

2. Bad advice. Your trusting client ended up buying the wrong products.

3. Lack of communication. They viewed this new relationship as a transaction. After helping your client, they never called again.

4. High fees. How did that happen? I thought they were ethical?

How Should You Follow Up Referrals?
You may be sending your client elsewhere, but you have responsibilities, too.

1. Was your client contacted? Call your client to determine if the person you suggested has been in communication. If they met once, was there follow-up?

2. Is your client satisfied? You want the agent or advisor to deliver service at the same level as you provide. A bad experience can put your relationship at risk.

3. Did the advisor contact you? You aren’t fishing for compliments. You want confirmation the two parties were in touch.

It would be good if the agent or advisor sent referrals in your direction, too, but that shouldn’t be the criteria for suggesting an expert to help your client solve a problem.

Bryce Sanders is president of Perceptive Business Solutions Inc. in New Hope, Pennsylvania. Reprinted with permission of AccountingWEB.

Related articles:

List of 18 Reasonable Client Expectations
What Accountants Should Expect From Their Clients
Annuities: How Much of What People Hear is True?