Gathering Data and Determining Objectives
To do what you do so well, you need to know your clients (KYC). You need to gather as much information as you can about them, their circumstances, their duties, their hopes, their fears, their abilities. To be a professional and a great advisor, there is no substitute for KYC.
Once you’ve gathered the facts, have the client sign off on them. I love the simple steps of having clients initial each page or email confirming they have the summary of the KYC facts and agree that they are accurate. Also, keep all of your investigations in a file. If you ever have a complaint, then you will want to show your work.
When gathering and determining objectives, you need to clearly understand not only the clients’ present financial status, but also their goals. And these must make sense; they must be smart.
Clarifying financial status; identifying problems and opportunities
Unless you explicitly (in writing and with careful explanations) get the client’s sign-off to the contrary, you can and should only implement suitable recommendations. Failing to follow this obvious rule is courting a date with a court of law. The greater risk is that you will lose a client relationship you have developed and valued.
If you don’t check what the clients say, when checking is possible, then your work is undermined by the simple “garbage in, garbage out” rule. If your clients say they have an income of $100K, get their tax returns for the previous 4 years. If they say their house is worth $600K, then look at the sales of similar houses in their neighborhood. You are not an expert evaluator, but use your common sense and experience. You know clients are often wrong about this information; don’t guess, find out. Show that you are the professional.
Develop strategies and present the plan
In the old days, the plan recommendation was the sales pitch. Now we do it in writing. We show our work and get clients to confirm that we have it right. We reinforce our recommendations with their opinions and agreement.
Should clients require expertise that you lack, refer them to appropriate professionals. Spotting issues that are not in your skill set is a mark of the confident and informed. Accepting your limitations and referring to appropriate professionals shows your own professional standards, your depth of knowledge, and shares the potential liability. It’s win-win.
I recommend, too, giving clients options with respect to timelines, income, inheritance, risk scenarios, among other issues. By getting them to make choices–ones that are reasonable–you can become an order-taker and lessen your risk. Also, clients who have bought into a written plan in which they have made informed choices are less likely to sue or complain to a regulatory body.
Implement the Plan
It is surprising how often the next step, plan implementation, is not taken. Successful execution requires identifying the team members, the steps they must take and when they need to implement them. As the quarterback, you have to oversee the plan and be the “center of influence.”
Monitor the plan
Monitoring the plan is essential. If you don’t monitor, you will miss problems and changes that occur over time and fail to meet service commitments made prior to the sale. You will also forgo sales opportunities that come with referrals. In my experience, the number one complaint of investors and insureds is that the advisor failed to monitor the plan and respond to post-sale enquiries.
Subsequent to the sale, a periodic review of the plan should be conducted to identify changes in the client’s situation and assess progress in meeting plan objectives. You should also clarify who on the advisory team is responsible for reviewing and reporting changes.
A question that advisors almost always ask me at presentations like these is, “If there is so much risk in my job, why should I work as a financial advisor?” The answer is obvious: because you need the income.
But that is trite. The real answer I think is that professionals love their work. They enjoy helping people to meet and surpass their goals. They are not guarantors of the result, but they are experts in, and guarantors of, the process. At the end of the day, we do what we love and are handsomely paid for this work. Not a bad job all in all.
In closing here are my 2 lessons to take away from today: (1) good communication equals good compliance; and (2) Show your work.
Harold L. Geller is chair of Geller and Co., the financial advisory group of Doucet McBride LLP, Ottawa, Ont. This is an abridged version of a presentation he gave at the MDRT annual meeting in Toronto.