The obligation to know your client is one of the most significant responsibilities you have as a financial advisor. And the reasons for doing so go well beyond fulfilling the regulatory requirements of the investment industry.
“You need to understand your clients to anticipate their needs,” says Rosemary Smyth, a Victoria-based business coach for advisors. “Otherwise, they might be poached by another advisor or look elsewhere for someone who understands them better.”
Clients are far more likely to refer you to their friends, family and colleagues if they feel that you are responsive to their needs, Smyth adds.
There’s much more to getting to know new clients than learning about their risk tolerance or asset levels. You need to find out what makes them tick and what their sensitivities are in order to get a sense of whether you can work together successfully.
With that in mind, here are six top questions to ask new clients:
1. “What are your values?”
Use open-ended questions, such as, “Tell me about your business, or your family,” says April Lynn Levitt, a coach with the Personal Coach in Oakville, Ont.
Another way to phrase the question, Levitt says, is: “What does success look like for you and your family?”
“[Open-ended questions] give you a real sense of what matters to the person and who they are,” Levitt says.
2. “Tell me about your experience with other advisors”
The response will tell you what the client was happy and unhappy about in his or her past advisor relationships. It signals what you should be aware of if you decide to work with him or her.
It also allows you to tailor the way you respond to your client’s concerns. If the prospect does not want to work with a small practice, for example, you can reassure him or her that you have sufficient support staff to meet their needs.
3. “What’s on your bucket list?”
The answer to this question allows you to explore your client’s plans and goals and opens up a discussion about retirement. Does a comfortable retirement mean travel, spending time with family or something else?
Give the client time to think about the answer, Smyth says. “If they can visualize it, it’s easier to explain what they want.”
4. “Where did your wealth come from?”
Did your client’s wealth come from an inheritance, a business or elsewhere?
“How you manage the client will depend on the answer,” says Andrew Pyle, senior wealth advisor with ScotiaMcLeod Inc. in Peterborough, Ont.
“Unlike people who worked for others, independent business people are used to controlling their destinies. That makes it difficult for them to relinquish control, and you need to be sensitive to it.”
5. “Tell me about your family structure”
Understanding family structure gives you a sense of what it will be like to work with that client, Pyle says.
Do the client’s children live close by? Are they in school or are they working? How involved are the children in what the parent does financially? Does the client want the children involved in estate planning?
6. “What are your investment trigger points?”
Is your client driven by concerns about the economy, markets, longevity of capital or inflation?
“Those things don’t show up on KYC forms,” Pyle says. “But you need to understand them. The client might not want to be in the stock market. They might prefer to invest in GICs instead. Or they might want a stock-trading buddy. Are you comfortable with that role?”
You don’t need to know everything about the client right away, Pyle says. Later planning meetings will allow you to drill down deeper.
At this point, you want to determine whether this will be a fruitful relationship or one that is fraught with problems. Once you cover the salient points, you’ll have a much clearer idea of the answer