Advisor Tax Mistake #2 – Not Getting Referrals from COIs

Tax preparation is a super-low-margin, super-high-volume business. The last thing a tax preparer has time or energy for is trying to grow their business. As such, your only chance of staying top of their mind is to stand out from the crowd and consistently make their life easier. Just sending them referrals for yet another tax return is not going to cut it.

What to do instead?

Here is a summary of the steps taken by some of the most successful financial advisors who get a consistent flow of referrals from COIs.

1. Respect the value of the COI’s time. Most tax preparers work on some combination of a per-return and/or per-hour system of charging for their time. When you come in asking them to give up an hour of billable time for you to pitch them on how cool your mom says you are, it starts the relationship with you at a deficit. Instead, anytime you contact a COI, offer to pay for the hour of their time. This is most certainly not trying to buy their love, but rather it is a demonstration that you respect their time, and while many COIs won’t accept payment from a fellow professional, just the act of offering will put you head and shoulders above every other advisor.

2. Stay top of mind in a good way. The advisors I know who are getting the most COI referrals treat their COIs like an A-level client. In other words, every quarter they are finding ways to deliver massive value to the COI. This could include gestures of kindness such as sending a gift basket during tax season (think bottles of Ibuprofen versus candy). But more importantly, it’s making their life easier through things like a 1099 letter every January, or providing them with easy to use client handouts like a guide to estimated payments, or simply offering to take them to lunch to get their thoughts on things like Roth conversions.

3. Make it easy to send referrals. While I am the first to advocate for having a niche, making your COI remember and screen for your niche will kill most chances of getting a referral. Instead, explain to your COI that, ”I do my best work with retirees who have done a great job saving, but I’m glad to get any client of yours pointed in the right direction.” This approach does require that you have a process for getting people who are not a good fit for your practice referred on to other resources. This can be as simple as giving the person quick advice and then introducing them to your favorite find-a-planner tool, or as white-gloved as having your own network of advisors to whom you can refer these clients. Either way, the easier it is to send you referrals, the more you will get.

4. Take action. The biggest difference between advisors I meet who dream about COI referrals and the advisors who are getting COI referrals is the amount of action they take. Block out time every month to cultivate these relationships, following a 12-month plan of intentional contact. You can’t just block out time; you need a plan for the whole year. If you have to sit down each month and think, “What was I going to do for my COIs this month?” your chances of following through are slim to none.

5. Keep perspective. COIs can be a great referral source, but there is other value to your clients in collaborating with great COIs. The process described in this article is great for building relationships so that you have tax resources readily available to you when your clients need them. Whether it’s to get a tax question answered or a tax return prepared, there are going to be tax issues that come up that you need to refer out. An average advisor makes a referral for a client and wishes them all the best. A rock-star advisor can make an introduction to a tax professional they know, have worked with and have confidence in.

Action items: Refer back to steps 1-4, block the time on your calendar and start executing.

Come back next week for part seven in this seven-week series. Until next time, happy tax planning!

Steven A. Jarvis, CPA, MBA, is CEO and head CPA of Retirement Tax Services.

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