The problem is age old - fear. Fear of entrusting clients to someone who may not service them as well as the referee does or, worse still, losing control of them.
And it is not going away. In fact, anti-alliance attitudes are being actively incorporated into business strategy, creating a counter-trend in the area of practice management.
Leading accounting association CPA Australia actively encourages its members to consider other business strategies ahead of forming an alliance. Its preference is for its members to become PS146 compliant before they jump into an alliance with a financial adviser.
While CPA Australia says financial planning should be considered as a core offering by its members, particularly given the way the competitive environment is shaping up, it is not promoting alliances as the best model to do this. "The fallback position is the opportunity for alliances and referral networks," CPA public practice general manager Peter Docherty says.
Training programs are also getting in on the act, dedicating part of their practice management modules to warning planners of just how time-wasting alliances can be.
Chris Unwin Training and Consultant Services founder and chief executive Chris Unwin regularly conducts a session titled "Working more effectively with centres of influence".
In it Unwin tells advisers it never ceases to amaze him how much time experienced financial advisers spend trying to tap into goldmines in other people's backyards.
"I am not anti-alliance, but advisers tend to look at that [alliances] first rather than their own backyard," he says.
At jeopardy is the successful partnership of risk advisers, self-managed superannuation fund (SMSF) practitioners, accountants and legal experts all providing the expertise for financial services professionals to provide a fully-integrated service model to their clients.
The two-speed trend
Anecdotally, there appears to be considerable disagreement in the industry on whether client referrals from an alliance are on the increase and indeed whether they are worth the effort.
It's a surprising finding given the weight alliances have in the industry as an effective practice management tool and reliable vehicle for business growth.
Macquarie Practice Consulting's "2010 Boutique Practice Benchmarking" study is an example of research that has been conducted to evaluate and measure the most successful ways a financial planning business can grow.
Identifying new sources of revenue as well as achieving organic growth were regarded as the best strategies to fight against the 26 per cent decrease in funds under advice reported by boutique practices in the two years to May last year.
However, primary referrals from accountants reportedly fell by almost 20 per cent in this two-year period, highlighting another opportunity to re-engage and reinvigorate this channel of referrals.
Further, with insurance regarded as an opportunity to grow revenues, practices reported they were interested in more training and development in this area.
But are financial services professionals listening to each other?
In 2007, CPA Australia released a report titled "Firms of the Future: Opportunities and challenges for public practices".
Four years later, this report continues to shape the international accounting body's attitude and approach to the financial planning industry.
In it, the report identified the need for accountants to make sure they had the technical skills to offer general financial planning and advised members they should be PS146 compliant.
"At this time, very little has changed since 2007. Some members who have entered the financial planning arena have discovered low return and high compliance costs and that it is hard to be everything to all people," Docherty says.
He describes accountants' current attitude to alliances as wary. While there is activity in this space, it is perhaps not in the way the financial planning industry would like.
"In theory people are considering what options are right for them. Some have exited from the financial planning arena, whereas other members have considered financial planning as their primary speciality," he says.
Despite this, there are obviously some practitioners in the accounting industry who are au fait with the concept of alliances.
Some dealer networks report they currently have more referral partners or accounting relationships than advisers and are desperate to attract more planners to help these businesses to grow.
"We are always on the lookout for planners," Australian Unity partnerships national manager Elise Michelmore says.
"And if they have got relationships themselves that do not have a lot of traction, we can provide a lot of support."
Australian Unity says it is currently also seeing a lot more proactive contact and referrals from existing alliance partnerships. Further, planners and accountants are working together more cohesively than ever before. "Now we are in a situation where there are a lot more accountants getting involved in business advisory space. They are working in collaboration more than ever," Michelmore says.
She says the current business environment has been conducive to planners and accountants more actively pursuing alliances.
"Certainly I believe with accountants losing their advice exemption on SMSFs that this has prompted activity in this space. They are very concerned they won't have a key part in their business," she says.
Other factors, such as tighter reforms and the increasing professionalism of the planning industry, have relieved some of accountants' uncertainty about alliances, she says.
Lonsdale is a business that has built a reputation on forming successful financial partnerships.
However, it says in the 12 months to June, client referral levels are not where they have been in the past.
As a result, the dealer group is about to launch a new module in its Catalyst program to try and reinvigorate any alliance relationships that may have plateaued.
But it is not as easy as simply creating a new model. There is a whole process to go with it and, of course, practitioners must have buy-in. "Half the battle is designing this, but you've got to get the guys to commit," Lonsdale associate services general manager Mark Stephen says.
Stephen says the business has looked to bring back some sales incentives that provide non-monetary awards so practitioners can have more fun with it and to recognise good performance.
"We are launching it at the October [Lonsdale] conference for everyone and then asking for a commitment," he says.
How alliances are evolving
The fully-integrated advice model, which brings together the services of a range of financial services professionals, complements the development of more alliances between service providers.
Whether it is an alliance with risk advisers, SMSF professionals, accountants or lawyers, the development of a formalised referral relationship enables a business to deliver a full advice journey for clients as well as accommodate the commencement of scaled advice in a strategic and competitive way.
But with details still to be released on the second tranche of the Future of Financial Advice reforms, many practitioners are still trying to work out who will be favoured by the replacement of the accountants' exemption announced by Financial Services and Superannuation Minister Bill Shorten.
"There will be a higher expectation with consumers and the ability to provide general advice may not be there. However, our core message remains unchanged: you need to have the appropriate qualifications," Docherty says.
Irrespective of the reform outcomes, the fully-integrated advice model has been embraced and it is actively shaping the way financial planning practices are thinking about alliances.
To Unwin, how practitioners will operate in the future is clear. "The norm will be a holistic service but within the one-stop shop will be specialist advisers," he says.
He says the most effective financial planning practitioners of the future will be built around having a relationship manager for every client.
The relationship manager for a client will be the practitioner who first introduced them to the business. From here, technical specialists will branch off from the relationship manager providing services such as the risk component and the accounting speciality.
Certainly the fully-integrated advice model is complementary with an alliance structure and businesses that are working to build this are finding it is working well for both financial planners and other specialist advisers. "We want to do the full advice journey with clients," Stephen says.
"We have done core financial planning pretty well; now we are extending to aged care and estate planning. So we have moved into completing the full advice journey."
So how does the introduction of scaled advice fit with this model? According to Stephen, it requires some education on both sides.
"We are educating accountants that more Australians are looking at accessing financial planners, but it does not have to be complete," he says.
"There is an assumption over who traditionally covers the entire financial objectives."
Despite this, he says during a recent professional development day, practitioners demonstrated they were very supportive of scaled advice. Lonsdale is currently working on designing the right pricing and servicing models.
The right match
"Accountants are finding it very difficult on who to form an alliance with. They are quite risk averse. They are quite wary before they set up an alliance," Docherty says.
Given CPA Australia's take on alliances with financial planners, it is unsurprising to hear that it does not help make connections between the two professions.
"The whole area of financial services is under such scrutiny, we decided not to facilitate connections," Docherty says.
However, he does say the association did consider forming a dealer group four to five years ago. "But with the unbelievable levels of scrutiny, we decided it was not best for our organisation and there were great opportunities in terms of dealer groups already available in the marketplace," he says.
Other groups are more than happy to facilitate these connections and have indeed built their business on it. But there is an art to it.
Australian Unity says it is picky when it comes to recruiting planners who are willing to partner with accountants to grow their business.
Communication and technical skills are important as is a self-supporting attitude.
"We have a pretty rigorous process. Any new planner will meet with our senior management team to check they have the requisite skills. Also, it comes down to gut feel," Michelmore says.
Not all alliances work out and further not all lead to the level of client referrals that was expected by both parties. For this reason, Australian Unity also spends time trying to make these work better and, likewise, Lonsdale with its new module to reinvigorate already established alliances.
For example, Michelmore says recently her business department met with an accountant who had formed a business alliance with a financial planner, but to date it was not going well and the accountant was unable to get excited about the venture.
"He said: 'I don't know what you guys did, but he's on fire,'" she says.
Reinvigorating alliances is now good business for Australian Unity. And surprisingly, Michelmore says it is not seeing much competition in this space.
Infrastructure required to make them work
According to Stephen, the control of the relationship between financial planners and accountants is intact. Income protection means practitioners still keep ownership and control over the relationship.
That said, Lonsdale has recently done some work on providing the right infrastructure to ensure alliances are successful.
"We have gone back to value statements. It is then quite clear what financial planners can offer accountants and what accountants can offer financial planners," Stephen says.
Michelmore says it is a team effort that makes an alliance work. A robust fee-sharing relationship and fantastic marketing skills are also made available to accountants.
The monitoring and measuring of client referrals is a must. Lonsdale is currently working on designing web-based tracking systems so businesses can monitor the client referrals that go in.
Disclosure of relationships as well as revenue sharing are a given and enable all three stakeholders in an alliance - the client, the accountant and the financial planner - to be clear on who has control of the client.
Getting value out of an alliance
A good marketing plan is essential and Australian Unity tailors plans for each practice. Paying brokerage correctly and in a timely manner is also crucial to making an alliance work.
Lonsdale also provides marketing collateral as well as tools to reinvigorate the flow of referrals between alliance partners.
So are client referrals the number one reason to seek an alliance?
Stephen says while alliances are, of course, beneficial from a financial perspective, they are really crucial if you want to deliver the aforementioned fully-integrated financial model.
Another benefit of an alliance is possible succession and joint venture opportunities. In Lonsdale, 90 per cent of its associates are aligned with accountants, so it is another opportunity the group can provide.
However, Stephen says the number one reason to form an alliance is the rule of reciprocity, or the notion of giving now to receive later. To measure the success of this, businesses must use qualitative and quantitative referral measures. "What can't be measured is not going to work," he says.
And just as value statements are important infrastructure around an alliance, they are also one of the best ways to formalise the referral process within an alliance. These will state the benefits that all parties can receive and allow expectations to be clear.
"Focus on what you are good at rather than being all things to all people. And keep an open mind. If you shut out options, it could be lost opportunities," Stephen says.
Common mistakes
Patience is required with alliances. Michelmore says Australian Unity has been working in this space for four to five years and it's only in the past 12 to 24 months that it has been getting some traction.
"Planners go and meet accountants and wait for business to fall into their laps," she says.
Another problem she says is trust has to be earned. Some planners expect to be referred an accountant's bigger clients from day one.
Unwin approaches the subject of alliances from the perspective of a specialist risk adviser. He says the best way to approach alliances is to keep things simple.
He says a common mistake planners make is to tell referrers why they should be referring business to them rather than understanding why it is that they have not referred before.
"It is usually because they are afraid the client will have a bad experience or they will lose the client," he says.
However, as he points out, the fear of a bad experience is going to be more marked if the client dies without adequate life insurance and there is the chance of losing a client because they didn't offer them the services they needed.
"The motivation for an accountant to refer risk advice to a risk adviser is from a selfish point of view: client retention is really important for the accountant as well as additional revenue," he says.
"There are tremendous revenue opportunities by doing the right thing by the client."
Finally, not doing enough work to make sure the referrer is 100 per cent comfortable with what it is the planner is providing is a mistake. The way around this is, of course, is to try and make the referrer a client. «
