What You Need to Know
- Advisors should focus on creating an experience that reinforces your lasting value to clients.
- Discuss product performance, changes in environment and whether the client's plan is on track.
- Educate your clients on Social Security, taxes, risk and cash flow.
In the old days of product-centric client relationships, financial planners used annual review meetings as an opportunity to sell more products, either by replacing older products or gaining a larger share of the client’s investable assets. For the last few decades, the financial services industry has been moving away from product-centric relationships. Current best practices put the client first and instead focus on plan-centric relationships.
As client relationships shift, the role of the annual review changes as well. Advisors should consider viewing their yearly client review meetings through a marketing lens rather than a sales lens. Focus on creating an experience that reinforces your lasting value, so that clients refer friends who have similar financial considerations.
Our practice focuses on middle-income people in or near retirement. Every service we offer is conceived and executed in a way that delivers value to that specific clientele. We discuss a few things in every client review meeting to make sure we are adding value. Consider these items the “do’s” in a list of “do’s and don’ts” for expanding your financial practice.
The backward-looking portion of the meeting includes discussions of topics such as:
- Product performance.
- Changes in the environment such as tax laws or asset class valuations.
- Whether the plan is on track since the last meeting; if not, why not, and what might need to change.
In the forward-looking portion of the meeting, we discuss:
- What changes have occurred in the client’s life since we last spoke?
- What is the client worried about in the coming year?
- What is the client excited about in the coming year?
- Are there any blind spots that they are concerned about or excited about that you are considering on their behalf?
- Does the plan need to change given the forward-looking portion of the meeting?
We also take a deeper look at the following areas:
Advisors have an excellent opportunity to educate clients about the future of Social Security and help them avoid making a claiming mistake out of fear. While the Social Security program is undoubtedly running low on funds, it doesn’t mean the system won’t pay a dime of benefits when the trust fund hits zero. If the trust funds are depleted, current tax revenue would still support roughly 75% of benefits.
Take the opportunity to discuss how a Social Security shortfall has been addressed historically, how it’s likely to be addressed going forward, and how to prepare if the Social Security trust funds do run out. What does it mean to your client’s financial plan? Does that mean that they run out of money 10 years earlier? Do they need to cut $300 per month out of their lifestyle today or work one or two years longer?
You don’t need to know all the complicated interactions between different tax provisions and types of income to determine the impact of taxes on a client’s retirement strategy. Reviewing the client’s tax situation annually could present some exciting opportunities for advisors who know where to look. There may be opportunities for Roth conversions. Converting part of a client’s traditional IRA into a Roth IRA can offer significant long-term tax benefits.