by Tony Vidler
Is it appropriate to share success with influencers?
Or, to put it another way, should you share remuneration or the spoils of the sale with referrers?
It is actually just a little more complicated than that. Before trying to answer the question of what to do with the harvest, I think it makes a lot more sense to put in the work thinking about how to create the harvest first.
Jumping straight to the question of “what to do when this succeeds” seems to come up continually when discussing the topic of developing referral Centres-Of-Influence (COI’s), and it is a divisive one. There are certainly some potential influencers who are definitely interested in getting a share of the spoils, and definitely some advisers who are very happy to share the revenue. There appear to be a lot more as far as I can tell in both the influencer category and the advisory world who shun the idea – and I admit I am one of who doesn’t think it appropriate to pay a COI for leads. My perception of the mood in professional services generally on this topic is that the “nays” far outweigh the “yays”.
This seems to be especially true when talking with professionals from non-financial-services sectors, such as lawyers and accountants and bankers. There is a strong ethical leaning away from the idea of sharing in the revenue for a professional referral. That feeling appears to be so strong much of the time that the suggestion of revenue-sharing is in itself a complete professional turn-off, to the point where they wouldn’t consider providing professional referrals to someone offering to split revenue or pay spotters fees or anything similar. So merely suggesting it is often dangerous and completely undermines an advisers efforts to create a COI relationship.
Yet, I continue to meet and speak with advisers who ask the question because they are willing to share revenue with those who do refer and they are keen to find ways to incentivise such referrals seeing as they believe incentives will generate the desired behaviour. So it seems that this remains an issue, or a barrier, for many financial advisers trying to cultivate the right type of relationship with potential influencers.
I believe the appropriate thing to do is is to be transparent and show a willingness to share success, but in such a way that it doesn’t compromise the professional position of the influencer. Being transparent means being open about the fact that revenue is being generated from business referrals…they know that in principle of course, but often influencers have no real idea of what levels of revenue a new client may be worth. My preference is to be open about the quantum…how much money is actually on the table. There are three reasons for this:
1. I don’t want someone to imagine there is more revenue being made than actually is. They do get influenced by headlines and media stories about the massive amounts of commissions, etc, etc that thieving financial advisers make on the sly. I want to kill that perception as quickly as I can, and have us dealing with facts.
2. I want them to know that I am being open about everything, including the often unspoken area of “money”. Open-ness leads to trust, and that is a critical ingredient in building a successful professional COI relationship.
3. I want to be commercial about it. It is a business tactic, and I am not hiding from that.
I want to prepare for a good harvest by putting in the right groundwork first.
When positioning with potential COI’s then I suggest being quite open about the typical client engagement, and the typical revenue generated from that engagement. While being open about it, be open also about the fact that this a key element of your marketing – and as a business person I have a marketing budget. I have to spend money each year to continue getting clients…that is just a fact of business. So too does the COI usually. They get it.
Typically we would allocate some 10-15% of the firms revenue to prospecting type efforts over the course of a production year, wouldn’t we? Isn’t this a prospecting effort?
If a COI relationship does provide good quality and well qualified business prospects then that is business I do not have to pay to find in the broader market place, and that is effectively a saving in marketing costs for my business.
Doesn’t it seem reasonable and fair to allocate that saved marketing budget elsewhere?
There are a number of ways we could use it, and I give the COI the choice in how that might be done. The opening suggestions are:
a. we can rebate it in some form directly to clients, either by way of a reduced fee or in some form of “thank you” to them from both of us.
b. we can allocate it to a charity or community organisation as a form of sponsorship from you or your firm, or even from the client potentially.
c. we can do something else with it if you’ve got a better idea…..
Option C of course does provide an opening for that occasional influencer who does want to discuss revenue sharing…but few do in my experience.
Option A fits neatly with most professionals views of what is appropriate, and it also provides a clear value directly to the clients which is a direct reflection of the COI’s involvement. In other words, the client gets a valuable discount or rebate simply because they are a client of the COI. Everyone wins in that one.
Option B appeals to the truly altruistic, or those with a cause which is especially important to them. It is also useful for those COI’s who do have strong views on professional positioning and do not wish to create any sense at all of discounting or rebating expectations flowing from mutual clients back to their own business.
As with so many things in professional services, the essential question asked at the beginning is actually a reasonable question. Commercially it makes sense to consider the issue. The adviser and any COI (usually) have commercial requirements…they are running businesses and need to generate revenue and make a profit if they are to keep staff employed and continue providing ongoing service and advice to clients. Therefore it IS fair to consider how to do the business in a profitable way.
But; as with so many things in professional services, the essential question is inter-woven with a host of other questions concerning ethics, regulatory expectations, statutory obligations, branding and professional images, customer perceptions and value….and on it goes. Somehow we have to balance all of these questions from all of the potential stakeholders (which is way more than just you and the COI who are having the actual conversation) and then be able to come up with a solution, or range of solutions, which meet the expectations of all stakeholders as well as achieving the commercial purpose.
So rather than approach the problem with a clumsy and inelegant offer to share commissions, think about how you can help the COI and the COI’s clients be better off while still acknowledging that we are in business and trying to create a mutually beneficial arrangement.
“Mutually beneficial” doesn’t just mean you and the COI….it means something which works to meet ALL stakeholders expectations…the customer, regulators, staff, suppliers…everyone involved. This is an area where the right outcome is one that scores a “win” for everyone.
It really is about sharing the harvest. However, to get the crops in successfully means a lot of work beforehand. You can’t jump striaght to preparing for the feast…
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