Tax & Accounting Blog

Choosing a financial planning partner

Accounting Firms, Accounting, Audit & Payroll, Blog, Business Practices, Business Strategy & Development, Financial Institutions, Organisations April 11, 2014

Offering financial planning services gives clients a holistic view of their financial position, now and into the future. But entering into a partnership with another firm is not a step to be taken lightly. What should you look for in a financial planning partner to help make the relationship a success?

For accounting firms, the main benefit of entering into a partnership arrangement with a financial planning firm is the ability to offer your clients more services without taking responsibility for these services or moving into the financial-advice sector yourself. However, the partnering process is not without its pitfalls, many of which are the result of mistakes made early in the relationship.

It’s important to remember that you’re dealing with a third party, so you need to make sure the potential partner is likeminded and that their client proposition matches the client you are hoping to refer. There’s nothing worse for an accountant than referring a client to a financial advisor who can’t provide the advice your client needs, as it will end up reflecting badly on you.

Types of partnerships

If you’re thinking of going down the partnership route, try to establish upfront the kind of partnering arrangement you want. There are several common partnerships to choose from:

  • Professional arrangements: This relationship allows you and a financial planner to refer clients to each other without the need to establish revenue-sharing arrangements.
  • Referral arrangements: In this relationship, the referring party is compensated for the time taken to make the referral and to provide any relevant information to aid the process. Compensation is generally only paid if the client proceeds with the services. Partners will often share the initial fee and an ongoing fee, should the client require ongoing services. These arrangements usually involve formalised agreements and are a popular way for accountants to diversify their revenue without taking on significant amounts of work.
  • A joint venture: This is a more complex and formal arrangement where both parties form a temporary partnership for the purpose of achieving a particular outcome. You and your partner may, for example, have clients of your own and then some clients in common under the joint-venture arrangement. Working together, you can provide a more comprehensive finance and accounting service. This partnership entails more legal paperwork, but it can be a great way to grow your revenue, as well as benefit from the capital value created.

Remember, for transparency purposes you are required by financial services law to disclose to the client any referral arrangements where income is shared.

Dating potential partners

When setting up any form of partnering arrangement, both parties need to be clear on their respective expectations, particularly around exclusivity, sharing any revenue and the anticipated number of referrals.

As a business owner, you are used to running things your own way, so you need to make sure your potential partner’s services align and that they have complementary personalities before you trust them to work with your clients.

The best partnerships effectively manage these expectations at the start of the arrangements and deliver the services both parties have agreed upon. At the end of the day, a partnership needs to be a two-way street.

Three tips for a successful partnership

  1. Aim for the same market: If you usually deal with high-net-worth individuals or businesses, a financial planner who specialises in families may not be the best partner.
  2. Do a taste test: Undergo the financial-planning process yourself so you know how your potential partner engages with their clients.
  3. Start with a trial: Unsure about partnering? Run a trial period to get a feel for the ratio of clients going in each direction. You can then make adjustments accordingly.

If you’re looking to take on a financial planning partner, ensure you take the necessary time to research and seek out