According to finance brokerage Diversifi’s director Rose M De Rossi, “opportunity is everywhere” when it comes to referral partners. Whether it’s traditional financial planner or real estate partnerships, or something a little more esoteric – like Diversifi’s partnerships with solution-based providers, such as a joint venture with an attic company and artificial grass business – these steps will help you building and solidifying your partners.
1) What should I look for in a referral partner?
According to Frontrunner Consulting founder Doug Mathlin, there are a number of things a broker should identify in their next potential referral partner:
- Values alignment: Check you have similar values, such as treating the customer right every time, responding in a timely manner, and seeking to improve processes.
- Business alignment: Both businesses should be on the same track – the referrer should want business growth and sustainability, just like the broker.
- Trust: Referral partnerships are very important; without trust, there is no relationship.
- Proximity/availability: The most effective referral relationships occur when the parties are closely located – this makes client access easier.
- Know your referrer: It’s hard to recommend a service you haven’t experienced. Each party should be able to speak ‘from experience’ during client recommendation
- Approachable: Make sure your client would be happy to have a 2-hour conversation with your referral partner.
De Rossi said when that when approaching a new relationship, the business checks to ensure that the service being offered is of professional standard. “We expect consistent communication, we expect prompt response times both to our clients and ourselves, we expect quality of product and process, and we expect efficiency,” she said.
2) What should I avoid in a potential partner?
Telltale ‘turn-offs’ can include mismatched personalities, according to aggregator ALCo’s general manager, Lesley Wood. "At ALCo we always give the referrer a choice of brokers so they can determine who best fits their requirements. This also applies where the broker is looking for a risk writer or planner – there must be a fit to be successful."
But there are other practical things to avoid. Mathlin said that if the prospective referrer is more interested in the ‘kick-back’ than the value of the relationship, this would indicate they are probably not making enough money from their core business. He added that if there is a ‘referral fee’ being offered, to make sure it goes both ways. “If a real estate agent wants 20% of the upfront fee, make sure you get 20% of any sales from listings you provide,” he said.
3) How should I approach building an agreement?
Diversifi has multiple referral relationships, and Rose M De Rossi said that an agreement can be reached by following the below steps:
1) Homework: De Rossi argues the first step in approaching a potential referrer is to do your homework, by researching their website, visibility, social media presence and even search the individual owners to establish their business ethics. Mathlin said these referrers can be found through contacts, including clients, friends and associates.
2) Approach: Mathlin said a letter or email outlining who you are, what you do and your intentions is a good way to make an approach. De Rossi said a phone call is the best way to initiate first contact, as it is much harder to say no on the phone and emails sometimes don’t end up with the person equipped for the enquiry.
3) Meeting: A series of meetings in both a neutral venue and each office is best, according to Mathlin, as it enables parties to get to know each other’s background, and also assess how they each do business as well as meeting their teams.
4) Proposal: De Rossi said a broker should have a well-documented proposal available in draft form to take to the interview, and they should be confident in your value proposition and fully explain how the relationship can be mutually beneficial.
5) Agreement: Brokers need to understand how to recommend each other’s businesses, and ensure each party will benefit from the relationship. Mathlin said parties should agree to the goals of the relationship for each party.
6) Communication: Mathlin said a regular relationship meeting - especially at the beginning –can help deal with teething problems. De Rossi said maintenance is about “communication, communication, communication”, and that Diversifi provides monthly reports with the outcomes of any referrals received.
4) Which professional relationships are the best?
ALCo’s Lesley Wood argues the best relationships depend more on the partner than the profession they are in. “We have seen successful referral relationships across various professions,” she said. “In saying that, professions that are solution driven/advice-based tend to support lending better in terms of quality leads, because the client is assessed – so the referrer is sending someone they feel the broker can really help.”
Mathlin agrees. “From m y observation, the best and most lucrative relationships for brokers come from accountants. People generally trust their accountant and go to them for advice. Also, accountants know about their clients borrowings and loans.”
However, Mathlin said there are many great real estate agent referrers as well as financial planners and others, and the key is that they have won a client’s trust.
Footnote: What about the NCCP?
Under the NCCP, referrals are allowed with several stipulations. According to Vicki Grey from law firm Gadens Lawyers, the current referrer exemption stipulates that the referrer cannot be an individual banned from performing credit activities, that the consumer must consent to having their contact details forwarded to a broker or lender, that the referrer has a business relationship with the broker or lender and that the broker or lender keeps a record of their referrers. The exemption also requires that a referrer must advise customers if they receive a commission for their referral, that they cannot be a business centred around referrals, and that the referrer does business from standard business premises.