Gaining The Ear

The last, he says, is of limited value because the trades generally are lopsided in favor of the partnering advisor. While, for example, he refers "a tremendous amount of business" to estate planning attorneys, he garners little business from them in return.

Chandik's observation dovetails with that of Prince, who strongly advises insurance advisors against making reciprocal referrals the basis of a relationship. "It's the worst business model you can run with," he says. "It doesn't work."

How much more effective are other techniques for building a referral-based business? Observers say the various incentives an insurance professional might offer–fee-sharing, joint-marketing, educational or policy review services, among others–are useful only to the extent they fit into the partnering advisor's practice.

A program like PAR may be well-suited to the experienced trust officer who has a large book of business and many ILITs to manage. But the newly recruited trust officer may be more interested in connecting with estate planning attorneys.

"The key is to take a detailed look at the individual's practice and devise a customized solution," says Prince. "Insurance professionals have to spend the time to understand the other advisor's business and what's important to them."

They also have to spend time apprising the prospective partner of the benefits of teaming with a life insurance advisor.

"Very few financial advisors do what I call strategic networking," says Bill Cates, president of Laurel, Md.-based Referral Coach International. "They have to engage in a process over a series of meetings that helps their counterpart understand the value they bring to the client. That's how they make themselves referable."

The professional courting can last many weeks–or months. Bob Esperti, the Estate & Wealth Strategies Institute's second co-director, says the process requires advisors to "meld with" (or assimilate into) the counterpart's professional culture, in part through training. Then they have to create trust and implement procedures for carrying out the referral.

Esperti, whose institute educates registered reps and investment advisors, among others, about the role of life insurance in the client's financial plan, says that formalized procedures are needed so the referral can be made with confidence and to ensure the client follows through.

So, for example, a registered rep would identify and explain to the client the need for insurance; refer the client to a partnering insurance agent; then explain that, as the client's investment advisor, he will work closely with the referred agent to ensure the client's insurance needs are fulfilled.

"Too often, the non-insurance professional simply makes the referral, and then assumes the process will take care of itself," says Esperti. "The result is failure because that's not the way the world works."

Given the close, ongoing collaboration required to make referral-based alliances effective, observers say life insurance professionals should generally limit themselves to 5 or fewer partnering advisors. More relationships would be difficult to support, unless they serve only as a resource to be tapped on an as-needed basis.

However the life insurance and non-insurance advisors meet–through an affluent client they have in common, another other advisor or attending a conference or social event–they'll have to connect on both a personal and professional level if the relationship is to gel, observers say.

They needn't have similar interests, walk in the same social circles or enjoy comparable life styles. But their areas of professional expertise should be complementary. And they should be targeting–and boast comparable track records winning the business of–the same affluent clients.

"Successful people like to work with other successful people," says Cates. "If you want to serve affluent clients, you have to have these relationships. That's the only way you'll meet them."

Adds Chandik: "I partner with real estate brokers but only those doing transactions valued at $2 million and up. You have to be very selective in picking advisors whose clientele matches your own, even if you like the person."