By now we all know that clients are not behaving in the familiar ways that we have grown accustomed to. Losing boatloads of money can sometimes have that effect on people.
No longer does the promise of a potential high return get Mrs. Jones and Mr. Smith salivating like it used to. Now more than ever, the saliva glands start to kick in when you mention things like: "safety," "guaranteed" or "government-backed." Unfortunately for the advisor, those saliva-triggering words often mean... tiny, tiny commissions. So what can an advisor who hopes to keep making payments on his Lamborghini do?
After months of extensive study and in-depth conversations with some of the financial world's leading minds (who happen to be at my local tavern), I have come up with the definitive risk tolerance questionnaire. By learning the answers to these five simple questions, the savvy rep will now know exactly which investments are right for a particular client or prospect.
Which of the following activities would you most enjoy?
A. Bungee jumping off the Golden Gate Bridge
B. Reading Oprah's book of the month
C. Swatting a hornet's nest with a baseball bat
If you could be a dog, which breed would you be?
A. Pit Bull
B. Teacup Yorkie
C. Mexican Hairless
Who is your favorite TV newsperson?
A. Katie Couric
B. Walter Cronkite
C. Keith Olbermann
What type of music do you like to listen to?
A. Explicit Rap
B. Broadway Showtunes
C. William Shatner's Greatest Hits
Where would you most like to vacation?
A. Alaska Wilderness
B. Naples, FL
C. North Korea
Here's what you need to know to interpret this test... Tally up your client's score by the letter and the number of time they chose that letter. For example: 1 A, 3 Bs, 1 C. The letter selected most determines the risk tolerance. Here is what the letters mean.
Answer A: This group appreciates a high risk / reward ratio. Feel free to offer this group private placements, oil and gas deals, and highly leveraged real estate programs.
Answer B: This group has absolutely no tolerance for risk. Whatever money they decide to take out of the pickle jar buried in the backyard and invest had better be safe. Certificates of Deposit and Treasury Bonds are a walk on the wild side for this group.
Answer C: This group is crazy and unstable. You do not want these people as clients. They will make your life a living hell. Tell them you are not a very good financial advisor and recommend they go visit your least favorite competitor.
So there you have it. I'm sure by now compliance departments across the country are scrambling to implement my new simple test. By answering five simple questions you will know for sure which direction to steer your future clients: to risk, away from risk or out your door.
Once a mildly amusing comedian, Bill Miller now works as a recruiter for a top independent broker-dealer; reach him at firstname.lastname@example.org.