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Adviser Workshop: How to handle referrals from other IFAs

Adviser Workshop: How to handle referrals from other IFAs

Bob Hair (pictured), Karen Rayner and Nick Platt describe the ins and outs of handling client referrals from other IFAs.

Bob Hair

Executive director and head of financial planning, Turcan Connell

We get referrals from other advisers largely by word of mouth, usually in relation to expert witness work, international pensions and pension transfers.

Referrals often come from IFAs who feel they don’t have adequate resources or experience to look at a particular issue.

When they refer a client to us, we would provide the client with the usual service. We would typically arrange that piece of advice on a transactional basis and keep the adviser informed by copying them into the correspondence.

Respect for referring advisers

It is difficult to alleviate the other adviser’s worry that the client may want to come to us for their full financial planning needs. I think sometimes we don’t get referrals for that reason. But you just shouldn’t [take other advisers’ clients]. If someone refers you for a particular piece of work, you have to respect the relationship between the adviser and client.

The other adviser has to pass on the control to us for the specialism we’re dealing with. The only person who is going to determine the advice I give a client is me: we live in a heavily regulated world and we’re not a gun for hire. But it doesn’t mean we ignore the insight and experience of someone who knows the client better than we do.

The advantages are mostly for the referring adviser, as they can call on us and devolve the responsibility of advice. Most importantly, no-one should be dabbling in things they don’t understand because the scope and breadth of what we [as advisers] have to cover is enormous.

Karen Rayner

Partner, The Wealth Care Partnership

IFAs refer clients to us because long-term care is something advisers have fairly little knowledge of. Even those who have the CF8 qualification don’t advise on it regularly.

We tend to restrict the service to the immediate care plan or immediate needs annuity. We would look at their care plan; we would find out whether it was a viable option and go through comparing that with other options, such as investing. We refer back to the client’s IFA to advise on investing the residue.

Taking control of the process

We make sure with any long-term care case that we deal with it and the other adviser doesn’t. They don’t provide the advice with us doing the work; we are the ones giving the advice and we don’t expect the other adviser to be involved in it.

That makes it easier because it avoids the issue of whether the adviser is just ticking boxes and trying to get the client to do what they want them to do. However, we keep the adviser abreast of all decisions.

We put in our agreement that we will only pay the adviser for the introduction if we get at least £1,000 on a case.

As for our fee charges to the client: we have a processing and consultation fee that is paid at the start. Then we will charge depending on the price range of the care plan or investment: the larger the pot of money, the smaller the fee.

One difficulty is sometimes if the client has a very good long-term relationship with their adviser, they will inevitably discuss our advice with their adviser and ask for their opinion. It could be difficult if their IFA says they think they can do something different. A lot of advisers don’t understand care plans: that can be an issue.

Nick Platt

Managing director, Henwood Court Financial Planning

We used to get a lot of referrals in the past because our advisers had the G60 pensions qualification. Unless they have that, advisers can’t advise on certain areas of pensions. We tended to work with IFAs we knew regionally and who trusted us with their clients.

We would give advice on the technical areas and once that had been given, the client would go back to their IFA, who would pick it up from there. We would help clients with things like income drawdown or analysis of occupational pension schemes.

Working to agreed guidelines

We would have some rules and guidelines drawn up with the other adviser before taking on the client: we would be specifically tasked to do the pensions advice and once that advice is given, the clients go back to their IFA. The client was made fully aware of the fact we would only be dealing with them in that specific area.

We would typically have a tracking system and keep the other IFA up to date: they would always be [copied] in on any communication sent to clients.

Unlike our normal clients, who would get a continuation of advice, this [process of advising referred clients] would be purely transactional. That is the reason why we don’t do it as much as we used to: we wanted to work with clients long-term and if a client is referred by another adviser, they wouldn’t be our client.

We typically charged the client a one-off project fee, which was extra to the fee they would pay to their adviser and would come directly to us.

I would never take on clients who want to come to us for their full service out of respect for the other IFAs. [The referrals are] undoubtedly about trust, and you cannot go into an agreement like this without that trust.

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