Referrals from centers of influence (COIs) are the most effective way to connect with new and potentially wealthier clients. These COIs are primarily accountants and attorneys.

While this is common knowledge in the wealth management industry, relatively few advisors successfully generate a steady stream of COI referrals. Institutional firms, such as RIA aggregators, brokers/dealers, and corporate RIAs, have recognized the business development potential of assisting advisors in building strategic relationships with COIs by establishing alliance programs.

COI alliance programs aim to empower advisors to work successfully with COIs. There are several versions of these programs, including:

  • Coaching. Educate and coach advisors on identifying high-potential COIs and establish mutually beneficial relationships, resulting in new wealth management clients.
  • Facilitating solicitor arrangements. It offers legal and corporate structures and guidance on establishing and managing arrangements for compensating the COIs.
  • Matchmaking: This process links advisors with COIs to establish a constructive referral arrangement. It frequently entails a revenue-sharing agreement between the advisors and the COIs.
  • CPA support. Offer a platform for CPA firms wanting to enter wealth management. The advisors are part of a firm aligned with the CPA firm or are subsidiaries.

CIO alliance programs typically incorporate elements from various types of programs. For instance, a corporate RIA that matches advisors with CPAs offers ongoing coaching to ensure a successful strategic relationship. This is crucial because merely matching rarely leads to high success rates.

COI alliance programs may offer some of the best opportunities for advisors, COIs and institutional firms. They are practical and, in some cases, exceptionally successful. However, many COI alliance programs fall far short of their potential. While they do yield results, those outcomes remain limited. One way to illustrate this is by examining the effectiveness of wealth management practices in accounting firms.

Why Few Accounting Firm Wealth Management Practices Are Very Successful

In a survey of 328 senior partners responsible for their accounting firm’s wealth management efforts, which have ten or fewer partners, 55% reported that these practices were unsuccessful (Exhibit 1). This indicates that their wealth management practices did not meet the firm’s expectations; it does not mean they did not help them serve clients better or generate revenue. Meanwhile, 31% of the senior partners reported that their wealth management practices were moderately successful, and only 14% stated they were very successful.

 

Regarding larger accounting firms, wealth management has often struggled to meet realistic goals. Successful mid-sized accounting firms typically have ten to 20 partners and generate revenues between $15 million and $50 million. With a deep understanding of wealth management opportunities, defining a baseline level of success becomes feasible. For the wealth management practices of mid-sized accounting firms at the two-year mark, two strong metrics of success frequently overlap:

• Adding $100 million or more in assets under management annually

• Delivering, at a minimum, 15% to 20% annual revenue contribution to the accounting firm sans attest revenues

A thorough analytical assessment of 109 mid-sized accounting firms’ wealth management practices found that roughly 10% met the success criteria (Exhibit 2). Unsurprisingly, all wealth management practices that satisfy one criterion also satisfy both.

 

Few accounting firm wealth management practices are achieving the possible success levels. However, there are ways to change this scenario so that they excel. Advisors must ensure that the COI alliance program they are interested in can actually deliver.

Evaluating A COI Alliance Program

If you are considering a transition to an institutional firm, partly due to its COI alliance program, you must carefully evaluate the program. Sometimes, advisors are understandably excited about the opportunities and recognize the importance of strong COI relationships. However, they may not thoroughly assess whether the COI alliance program can deliver on its promises.

The following are some questions that can help in evaluating COI alliance programs. A good place to start is with: How does the COI alliance program operate? 

This is a broad question aimed at comprehensively understanding the program. Sometimes, the answers will delve into details that can help you decide. Other times, the responses reflect the information in the institutional firm’s handout materials and website. You seek specific details and will likely need to probe further to assess the program’s viability.

Another question you may ask is: What is considered a success in the COI alliance program? 

You want to determine if their definition of success aligns with yours. For instance, if they are talking about acquiring five new high-net-worth clients that won’t significantly impact your business, their COI program may not be necessary for meaningfully growing your wealth management practice.

If the definitions of success align, it’s wise to understand how well the program is delivering. Therefore, a question to consider is: How many advisors in the program are achieving that success? 

The question concerns the percentage of advisors in the program; a significant percentage are often reluctant to invest in building strong COI relationships due to the considerable work involved. You can immediately rule out these advisors. What you want to hear is that most of the COI alliance program advisors are achieving the level of success you desire or are on a fast track to it.

A fundamental question to ask is: What methodologies are fundamental to the COI alliance program? 

You want to understand how to achieve success and what it entails. For example, Ultimate Rainmaker is a methodology that, when implemented correctly, generates a pipeline of new wealthy clients from COIs. This is not to say that Ultimate Rainmaker is the only methodology that results in a conveyor belt of new wealth clients. However, there are COI alliance programs that promote ways to garner COI referrals that do not deliver. You must be confident that you will get exceptional results if you commit to the COI alliance program.

Another consideration is the nature of the support a COI alliance program provides, so ask: What continuous support does the COI alliance program offer?

Advisors who have mastered Ultimate Rainmaker often leave the first meeting with a COI with potential high-net-worth client introductions. Mastering Ultimate Rainmaker takes time and effort; along the way, you will get a steady flow of new, wealthy clients. To master Ultimate Rainmaker requires ongoing coaching for a while.

Every effective COI referral methodology requires ongoing support to help you become proficient. Therefore, you need details about the type of support the COI alliance program offers.

Regarding COI matching programs, it is worthwhile to ask:

  • What are the characteristics of the COI?
  • How are the matches between advisors and COIs determined?
  • What is the timeline for being matched with a COI?

COI matching programs sound great, and they can be. The complication is that some of them are more hype than substance. For instance, the COIs with which you might connect have limited opportunities. More concerning is that, sometimes, there are no COIs to connect you with. You must ensure that the COI with which you are matched will help you achieve success as you define it.

These questions and others will help you select a COI alliance program that empowers you and significantly boosts your success. It is essential to delve into the possibilities and limitations of a COI alliance program you are considering.

Conclusion

There is considerable discussion about advisors moving upmarket. A survey of 421 advisors reveals that 65% wish to move upmarket, which they define as working with more affluent clients (Exhibit 3). Although advisors express considerable interest in expanding their practices to attract more affluent clients, just over 85% have struggled to elevate their practices to the upscale market (Exhibit 4). Building a pipeline of new wealthy clients through COI is the key to a more successful practice for most advisors. You can significantly enhance your practice by selecting a high-quality COI alliance program and putting in the necessary effort. You have resolved the challenge of reaching wealthier clients. However, many COI alliance programs lack quality and do not produce results.