What is the role of the introducer? (Published on IFAonline 27-11-07)

Jim Constable's Talking Point

FP Advance deals with a range of IFA practices from single owner/adviser businesses, to co-owned practices, to multi RI firms, based all over the UK.

Many of these businesses work with Professional Connections, have done in the past, or are seeking to do so more in the future.

A significant anomaly we often come across is the variety of introducer arrangements that are in place, both financially and operationally.

A firm I was speaking to last week has an arrangement where a local City Centre Accountancy Practice introduces their clients to him.

There is no financial arrangement in place at all – no commission splits, no charge per case, nothing.

The IFA is fee based and the Accountant knows and understands the service that the IFA offers and the value to his clients.

The IFA and I were comparing this to previous, and perhaps more common practices.

He himself had an agreement in a former life, where he paid away 40% of his commission earnings to the introducer – until he questioned what the introducer was doing for his 40%.

Of course even if there is a financial arrangement both parties in a healthy contract will be clear what the others’ roles and responsibilities are.

I was telling the same IFA that I’ve yet to find an arrangement where the introducer is paying the IFA a fee to see the client – perhaps paying the adviser for his Discovery meeting (where adviser and client are seeing if they are right for each other and if they wish to work together).

I told the IFA that I’ve not come across this but that I wouldn’t be completely surprised if it happened, either now or in the future.

After all, when you refer a client to an Accountant or Solicitor they charge for their time, and they certainly don’t pay you any of their professional fees.

Ultimately though a financial payment in either direction should only be necessary if there is a significant difference in the value that each party receives in the arrangement.

In many cases where IFAs are simply fed clients by the introducer to provide transactional advice on the low hanging fruit (or product sale) one could argue the IFA is receiving more value.

However the true calculation of value depends on what the IFA delivers in their advice and service.

Once again we are seeing better quality IFAs who are providing genuine advice able to demonstrate their value proposition clearly to introducers and change the traditional balance of payments situation.

A high quality relationship needs to be based on honesty, trust, mutual respect and professionalism.v

Perhaps this is the starting point in any profitable arrangement before financials or anything else are discussed.

Jim Constable is a senior consultant at FP Advance.

The views expressed in this article of those of its author and do not necessarily represent those of IFAonline or any other Incisive Media affiliated organisation.

This article was first published by IFAonline part of the Incisive Media group.

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