Ask Friends, Listen to Accountant


The search for a new financial advisor can be an extensive one. That is especially true for those looking for their first advisor, because a person might be starting from ground zero in their search process.

Advisors rely most heavily on referrals for acquiring new business. If that is the case, to whom would you listen for a reliable referral that could point you in the proper direction in the process of finding a first or new financial advisor? Are there techniques you would use to supplement the referrals you receive before proceeding with the interview process?
Determining how investors proceed in their search for an advisor is the goal of the Spectrem study Preferred Sales Approach: Capturing the Wealthy Investor. The study includes all the details regarding the topics investors cover when they begin the search for a new or first advisor.
Appropriately, the study starts at the beginning by asking investors what maneuvers they would use initially in their search for a new advisor. The top response was “research the firm the advisor works for”, with 57 percent of investors agreeing that would be part of their process. The question with such a response is that it requires investors to know what questions they want to ask about the advisor they are looking for.
Which brings us to the 44 percent of investors who would turn to friends and family for advice on specific advisors or other matters related to the selection of a new advisor. It makes sense to discuss an issue as important as selecting a new advisor with someone you know who has gone through the process and has their own hits and misses to reflect on when considering the services of a financial advisor.
This consideration of friends and family helps explain why advisors often bring up the topic of referrals or make suggestions to clients about passing their name along to friends or family members in search of an advisor.
However, while a friend or family member might be a place many investors start when looking for a new advisor, they are more likely to consider a different voice in the process. When investors were asked to name the No. 1 source of referrals for an appropriate advisor, 42 percent of investors said the resource they would give the greatest credence to in finding a new advisor would be their personal accountant. That was a much larger percentage than the 23 percent who said they would give the greatest attention to the referral from a family member, or the 18 percent who said the friend suggestion would be the most powerful.
Accountants are likely to have a good idea which advisors are both successful and easy to work with, since they often have business relationships with advisors in an attempt to balance a client’s investment desires with tax-related concerns. Also, a referral from an accountant that does not work out could come back to harm the relationship between the accountant and the investor, so the accountant is likely to make referrals with care and caution.
The Spectrem study segments investors on a number of demographic categories, and the occupational cuts are the most revealing. Educators (47 percent) and Senior Corporate Executives (46 percent) voiced the greatest support for the accountant referral, while investors in the field of Information Technology were more likely to consider the recommendation from a family member (30 percent) or friend (28 percent) over that of their accountant (25 percent). It is likely the Information Technology investors skew younger, and younger investors often do not have a strong or lengthy relationship with their accountant that would presume they would pay closer attention to a referral from that professional over friends or family members.
Where would you go to get a referral for a first or new advisor? Who do you trust to provide you with the advisor who could best suit your needs? Do your friends or family have the same advice needs as you do? Or does your accountant know your situation better than Mom, Dad, your siblings or your best friend?