April 22, 2014
An increase in risk insurance referrals by accountants will make great in-roads into Australia’s underinsurance gap, one industry expert has advised.
Responding to recent research from the Financial Services Council and MetLife (see: Underinsurance – Apathy the Real Enemy), David Phelan, from Effective Referral Management, said a referral from a trusted source was an excellent solution to overcoming client apathy.
According to Mr Phelan, clients fail to act on their insurance need because they are paralysed by questions like: ‘Where do I go?’, ‘Who do I talk to?’, ‘Where do I start?’, and ‘What level of cover is required?’. But if they receive the answers to these questions from a professional to whom they have been referred by their trusted accountant, Mr Phelan believes clients will be empowered to act.
“There is plenty of evidence that clients look first to their accountant when faced with a financial problem,” Mr Phelan said. “There is usually a lot of trust built up between the two parties, particularly if they have been working together over a number of years.”
There is plenty of evidence that clients look first to their accountant when faced with a financial problem
He said small business owners in particular are likely to have developed a strong, trusted relationship with their accountant, because of the integral role they play in setting up and assisting SME’s to run their business. These are clients financial advisers may not otherwise gain access to, without an introduction from an accountant.
However, Mr Phelan believes accountants need to take a more proactive role in ensuring their clients are adequately protected, and that advisers can and should assist them to deliver this service.
“If accountants proactively refer their clients for risk advice and make sure their total insurance needs are addressed, then this will make great in-roads into the underinsurance disease in Australia.
“Risk insurance is sometimes complex, and this type of advice is very different to accounting or even financial planning advice. Accountants can find it difficult to raise the topic with their clients. They may not recognise the importance of insurance and its role in protecting their clients’ assets.
“It is really up to the adviser, as one half of a strong referral partnership, to educate the accountant on the risk advice process and show them how to introduce it with clients.”
Mr Phelan said risk specialist advisers needed to proactively develop partnerships with accountants.
“In my experience, cold-calling potential referral partners never works. Instead, advisers should look at obtaining a referral of their own, from one of their existing clients who also has a relationship with an accountant.”
The other big mistake advisers commonly make is discussing the accountants’ client base too early in the relationship, and trying to get access to those clients before establishing what they can do for the accountant’s business and gaining a level of trust.
There should be no surprises in the relationship
“The first meeting between prospective referral partners needs to focus on establishing whether there is a cultural alignment between the two businesses. Ask them what their growth plans are, and about their overall business philosophy. Are they truly interested in offering additional services to their clients in a proactive manner?”
The final piece of advice Mr Phelan offered advisers was to develop a robust, disciplined reporting process, so the accountant remains across everything that is being done for their clients.
“There should be no surprises in the relationship. The accountant is transferring the trust they have built up with their client onto another service provider, so they need to be confident that the client’s interests will be put first. It is critical that the adviser keeps the accountant up to date with each and every client that is referred.”