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7 ways to do more with year-end reviews

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Year-end client reviews are too often viewed as just another item to check off of an advisor’s to-do list.

Instead, make them an important tool to strengthen your relationship with clients and remind them of the value you provide and the many things you’ve done for them during the last 365 days.

It’s that time of year again when clients make the annual pilgrimage to your office to review their finances. You make some small talk about the holidays, travel plans, kids and grandchildren, and then you run through a quick review of the relevant financial information. Everything looks good, see you next year.

That’s an exaggeration, of course—most advisors put significant effort into making their year-end reviews beneficial for clients. Still, there’s a risk these meetings become perfunctory, especially when the clients’ lives and the financial markets have been uneventful. But structuring the meetings in order to get through them as quickly as possible can be a mistake. Doing so neglects an opportunity to do a better job for clients, strengthen your relationship and remind them about the value of the services you provide. influence factorInfluencing factors

The nature of your work for the client influences what you can realistically hope to cover in the meeting. If you handle just a small part of the client’s finances—long-term care insurance (LTCI), for instance—that topic will naturally drive the review’s focus, at least initially. Clients who deliberately limit your involvement in their finances—“You’re my insurance advisor”—might not appreciate your attempt to expand the review’s discussion into other areas. If you’re providing a more comprehensive financial planning or wealth management service, though, the client likely expects a broader review.

Many advisors are in touch with clients regularly during the year, either in person or via email, phone, video chat, and so on. In those cases, the year-end meeting doesn’t have to cover as much ground as a single, annual session. Again, the advisory relationship influences the contact frequency. You typically don’t need as much contact with insurance or annuity clients as with financial planning and investment management clients.

Also, clients nowadays have much better access to information about their finances. They can monitor their accounts and investment values in real time and find an abundance of online advice. The widespread availability of incorrect and incomplete financial information can create problems, but this plethora of available data can have a positive influence on a year-end meeting’s agenda. If clients already know how their investment portfolio has been performing, for example, you don’t have to rehash every holding’s results but can focus instead on broader themes like allocation decisions.  coverWhat to cover

An agenda enhances a meeting’s efficiency. One agenda structure is to start with the major areas of financial planning, such as risk management, investments, income taxation, retirement planning and estate planning.

Heidi Davis, CFP with Columbia Financial Planning LLC in Bellevue, Washington points to several topics that are important to review within this framework. For income tax reviews, she notes in an email, projecting the year’s tax liability in advance, in October or November, for instance, buys the client some time to determine whether withholdings are adequate. A tax return projection also provides a sense of the clients’ IRA eligibility for the year and whether they should go Roth, non-deductible or traditional. The December 31 date imposes a cut-off timeframe for IRA to Roth conversions and the establishment of certain retirement accounts, such as self-employed 401(k)s. It’s also the last date for recognizing gains and losses on asset sales.

Davis also reviews clients’ employee benefits because plans may use the year-end period as the enrollment time to change employee benefits. If that’s the case, a review of available plans and benefits can help clients allocate their funds more effectively, she says. A growing number of companies are also offering voluntary benefits, such as supplemental disability and life insurance, that might fit well with the clients’ needs. Clients also need to review and sign deferred compensation agreements by year-end. If the company offers an employee stock purchase plan, check to see if the plan requires a participation decision by December 31. risk managementRisk management

Risk management was once a fairly static aspect of clients’ financial lives. Annual insurance and annuity reviews might uncover a needed change, but unless something significant happened in the client’s life, the status quo often held.

Life changes still require responses, but industry trends are just as likely to necessitate reviews, especially with LTCI and health insurance. Policy changes, particularly those that increase premiums or change benefits, can force clients to consider modifying policies or changing insurers. The adage, “Health insurance planning is the new retirement planning,” illustrates just how important health insurance management has become for retirees. portfolio reviewPortfolio reviews

Year-end portfolio reviews usually don’t differ much from mid-year or other scheduled reviews. You review clients’ goals versus their asset allocation; rebalance if necessary; review non-performing investments; recognize gains and harvest losses, and so on.

Those are all necessary steps, but this year it might make sense to also revisit clients’ risk tolerance levels. Bond yields have been trending lower since the early 1980s and stock prices have been in a bull market since early 2009. Performances like those make it easy for investors to forget the pain of a bear market, although the recent volatility might serve as a wake-up call.

Those conditions can lead to complacency, which is often quickly replaced by panic, should the markets show sustained weakness. This could be the right time to start reassessing clients’ risk tolerance, either with formal questionnaires or straightforward questions: “How would you feel if your stocks lost 30 percent—say, about $100,000 (or the relevant amount)—of their value over the next year?” A volatility gut check could help clients rethink their exposure to risky assets and it’s easier to take the necessary steps when times are calm rather than during a market rout. happy birthdayHappy birthday

Michael Gibney, CFP with Highland Financial Advisors LLC in Riverdale, New Jersey uses year-end meetings to remind clients of how upcoming birthdays can factor into their finances. The relevant dates cover the age spectrum, he says:

            • If someone is turning 18 or 21, we address any custodial account strategies.
            • If someone is turning 50, we make sure he or she is aware of catch-up opportunities with their 401(k), 403(b), and IRAs.  Even if someone turns 50 on December 31st, 2015, he or she can take advantage of the catch-up for the year.
    • For clients turning 62, we make sure they are aware of their Social Security options. Ideally, the Social Security conversation has been ongoing and they are ready to make a decision to begin benefits or postpone.
    • When clients approach 65, we make sure they are fully aware of their Medicare options. Again, we should have been preparing for this conversation.
    • Finally, if someone is turning 70, we review required minimum distribution strategies.

numbersBeyond the numbers

Susan Acker, senior wealth advisor with Bank of America Merrill Lynch in Rochester, New York, believes that too many advisors approach year-end reviews with a checklist mentality; but clients don’t view it that way. In her experience, clients take a more reflective approach and focus on what’s important to them: family, friends and their lives. That mindset gives Acker an opportunity to “really engage them at a different level, something much more substantial than taking a look at unrealized gains and losses and market conditions,” she says.

When Acker meets with clients, she reviews those priorities with them on her iPad. “I sit with the clients and ask them to prioritize those priorities,” she says. “And then we talk about the things that are embedded in each one of those key elements of what comes next in life, how much more information they want and what they want to do with each of those priorities. So my list of what comes next in those discussions is actually driven by the client and what matters most to them.” you need meWhy you need me

The emergence of robo-advisors and other low-cost financial advisory services could lead some clients to question the value of your services. That questioning could be motivated, at least in part, because they don’t see everything you do for them. An advisor once explained to me how he demonstrates his firm’s value-added activities during the annual meeting. He uses his client relationship management (CRM) software to record all client contacts and provided services.

Everything the firms does for the client, including phone calls and emails, trades, and service requests, among other activities, gets recorded. The firm’s advisory staff prints out the client’s service history for the past year and brings it to the year-end meeting. That detailed record allows them, in a subtle way, to show clients just how much work the firm does for them, even if clients are unaware of much of the activity during the course of the year.


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