Four common mistakes to avoid

“Some advisors often focus on what they can do versus finding solutions for their clients,” says Konrad Kopacz, portfolio manager and investment advisor with Echelon Wealth Partners Inc. in Toronto.

While some clients might be willing to overlook certain lapses, others can be unforgiving and may decide to take their business elsewhere.

Here are four common mistakes you should avoid:

1. Failing to follow an adequate discovery process with new clients
Each client is unique, so you have to take the time to understand each client’s specific needs, Kopacz says. Some advisors focus more on the products they offer than in taking the time to get to know their clients.

The “know your client” questionnaire provides a broad perspective on your client’s investment objectives and time horizon, but it provides little detailed personal information. So, you have to ask more personal questions in order to understand each client’s unique circumstances prior to making any financial recommendations.

If you don’t inquire about your clients’ personal situations, they might begin to question whether you are really interested in helping them.

You should also take the time to educate your clients about financial markets, the various products available and your process. “You have a responsibility to do so,” Kopacz says.

2. Being less than transparent
You must be sure to offer full disclosure about all fees and commissions you receive and any referral arrangements you have with other parties that are pertinent to the client relationship. You also must make sure clients understand product features and any risks associated with the products you might recommend.

“Product suitability is paramount,” Kopacz says. So, you should ensure that clients understand the benefits of owning a certain product in relation to their specific needs.

3. Creating unrealistic expectations
Avoid creating false perceptions about market performance and making promises to clients that you might not be able to fulfill.

Rather than relying on past performance to explain a product, Kopacz says, discuss how the markets work. Clients may be deceived by market performance during periods of growth and expect that their investments will always perform that well. They will become disappointed when the market declines and may blame you for misleading them.

You also should make sure that you keep your promise of communicating regularly with your clients. If you say you will contact them monthly, be sure to do so.

4. Keep accurate records
Always take notes during client meetings and email a recap to them after each meeting, Kopacz says, especially if you discussed investment recommendations or changes to their portfolio. You can then email a summary of points covered during the meeting to the client to ensure there are no misunderstandings.

Keeping records of your meetings in this way can protect you from a compliance standpoint should a dispute arise over what transpired during the meeting. Documenting your discussion provides proof of your discussion.

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