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. Influencing 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. What 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 management