Quid pro quo. If I refer a client to you, should I have a corresponding expectation that you’ll soon refer one to me?
It seems that many professionals in the legal, tax and financial services industries have quid pro quo attitudes. I’ve noticed it over my 27 years practicing as an estate-planning attorney. It seems that doing a great job for a referral isn’t enough. There’s an expectation that if you scratch my back then I’ll scratch yours.
Is that unreasonable?
Certainly we all have our referral networks of complementary firms. Despite also holding my license as a CPA, I made a business decision years ago not to provide gift and estate tax return services to my clients. Rather, I refer that work to local CPAs. I felt that if CPAs knew I wouldn’t take on tax preparation work when they referred me an estate-planning client, then I’d have an advantage over other local attorneys who jumped at that lucrative work.
A Knowledgeable Referral Source
What I learned early on, however, was that many local CPAs didn’t know enough about the intricate transfer tax laws to do a good job. In fact, I saw a few lousy returns. So I found highly qualified and competent CPAs and referred a majority of the estate and gift tax return work to them. Over the years, I’ve referred a great deal more work out to those CPAs than I’ve received legal work back in return.
But that’s okay with me. I never expected it.
Things May Not Be As They Appear
About 12 years ago, I was also instrumental in the creation of a private trust company. A friend and colleague was the regional CEO of a large bank, and because of internal political reasons, he was unceremoniously fired. His superior flew in a private jet from Orlando to Fort Myers and summoned my friend to the airfield, where he delivered the pink slip. The boss never got off the airplane.
As he stood on the tarmac clutching his pink slip while watching the private jet take off, my friend’s first call was to his wife. His second call was to me. I’d suggested two years prior to the incident that he take his team and form an independent private trust company. He scoffed at the idea then, but was now ready. “Let’s do it!” he said.
And we did. I was one of the founding shareholders and have served on the firm’s board of directors since its inception.
But guess what? A number of financial advisors, as well as competing trust companies who’d in the past referred me a lot of business, suddenly felt that I was the competition. Their referrals dried up. One bank went so far as to not renew a line of credit that I’d tapped to build an addition to my home.
Despite their fears, which still apparently exist to this day, I refer a great deal of business to financial advisors, banks and trust companies that compete with the firm that I helped create. I do this for a number of reasons. First, I don’t want to be accused of having a conflict of interest when referring to a bank, trust company or financial firm. I typically give out several names for that reason. Second, considering each individual situation on its own merits, I may feel that other firms match up better for a particular client.
I do this despite the fact that the firm I refer my client to may consider me a competitor and won’t likely return the favor.
Am I just an all-around good guy? I’d like to think so! But there’s a deeper intentionality to my actions, and that’s the lesson here.
By limiting your referral networks solely to those who return the favor on a regular basis, you aren’t necessarily looking out for your client’s best interests; rather, you’re looking out for your own.
Seek out those professionals in complimentary fields who perform exceptional work whether or not they’re likely referral sources. I’ve found when I refer my clients to the most qualified professionals, my clients are both satisfied with the services received and are impressed that I seem to know the right person or firm to go to in any situation.
That’s resulted in many happy clients, who refer me business in droves. More than 75 percent of my firm’s new work comes from our existing client base. Consequently, our practice has grown exponentially. I also receive referrals from a variety of professionals who seem to share the same mindset that I have about quid pro quo. Without those expectations, life seems easier for everyone involved.
Eventually the Well Runs Dry
The ancillary benefit for rejecting the quid pro quo mentality is that your referral sources’ well eventually runs dry. After they’ve referred to you a majority of the available clients in their own client base, the number of referrals tends to drop off. If by then, you haven’t met that particular professional’s quid pro quo expectations, then the relationship can become strained. Further, you may want to seek greener pastures for a new source whose client base may need your services.
It can become a vicious circle, which does more damage to your reputation than good.
Because the quid pro quo mindset is so prevalent, if you suspect that it’s harbored within one of the professionals you do business with, have a conversation about expectations. If you let each other “off the hook,” then the relationship could flourish on its own over time and, like all things, will find a workable balance.
But in the end it starts with you. Let go of the quid pro quo. I guarantee your practice will become easier, more successful and fulfilling.
Published July 11, 2016 on wealthmanagement.com