Among your financial professional connections, who do you trust? Who’s your “Go To” person for financial planning advice?
No doubt you have spent a significant amount of time building your client relationships and are very protective of them. So, whether client situations require you to refer clients to financial professional connections or you are looking to develop such relationships to build your client base further - how do you ensure you select a “Go To” financial planning firm you trust to deal with your clients as expertly as you do? This is where Due Diligence comes in.
9 top tips for due diligence referrals
Good due diligence helps make sure you’re choosing the right financial planner or firm for your clients. You need to be confident you’re asking the right questions for your clients and can demonstrate to the regulator how you made your decision. Look at your client proposition and get to understand how a financial planner may or may not complement your clients’ needs.
If things do gone wrong, well documented due diligence will enable you to justify the decisions you made at the time. By doing this, due diligence should reduce both reputational and financial risk.
- Adopt an overall referrals procedure, which would be adopted by management and administered by the firm's COLP -note the fact that the Law Society recommends strongly that firms should only refer to independent financial advisers.
- Establish and install a process for conducting due diligence.
- Understand what you are trying to achieve from the process. Spell out the criteria for selection.
- Research financial planners/firms in your area and the services they provide and draw up a shortlist.
- Document what you’ve done so you have the evidence should anyone ask (and anyone can, clients as well as the regulator).
- Meet with a number of Financial Planners/Firms to gain an understanding of how they work with clients and whether this fits with your own approach. The following questions may help:
- Is independent or restricted advice offered?
- What level of qualifications/accreditations has the financial planner and their team achieved?
- Do they provide a full financial planning service or a transactional based service?
- Do they have policies and procedures which are consistent with the IFP's Code of Ethics and Practice Standards?
- Are their fees and charges clear, consistent and transparent?
- What level of support does the financial planner/firm and their team provide?
- You or your firm needs to satisfy yourself that:
- all relevant legal requirements have been met – check the terms and conditions
- you have clearly stated your objectives and how they relate to other values or interests which are relevant to the work or may impact it
- all appropriate background information has been gathered and incorporated on the financial planner or firm
- Document your outcomes and how you came to make your final decision, whether that is a panel of referees or a single referee. Remember, your referrals probably won’t be a one off - you will be creating a long standing relationship that will evolve over time. So the due diligence can’t be a one off; it needs to be refined and constantly evolved in line with the market and changing needs. It shouldn’t be a tick box exercise. Done properly, not only will you satisfy the regulator, you will be able to add real value to your business.
If you are nervous about making referrals and wish to only work with trusted and like minded individuals, dealing with an Accredited Financial Planning Firm (AFPF) should give you greater peace of mind. AFPF members represent the very top of the financial planning profession as to achieve accreditation by the Institute of Financial Planning, they must evidence the highest standards in qualifications, regulation and ethics in the financial planning industry not just once but annually.
Hopefully you now have the tools to identify who can you trust to help your clients plan their finances and who your “Go To” financial planner referrer should be.