The pecuniary advisor client relationship is a delicate one. Dealing with a client’s financial future is a heavy responsibility for the advisor. How you course the initial client contact and the questions you ask may mean the difference between a fruitful, trusting, long term relationship or a ruined client.
Ask these five questions to create trust and a long term financial advisor-client relationship. The following uncertainties will show the client you want to understand them and create a platform for a transparent relationship. By starting out on the right foot, future misreadings are minimized.
These questions fall into three broad categories; relationship, risk, and wealth accumulation.
Key Takeaways
- Remunerative financial advisors understand that their business is more than making market recommendations.
- Getting to be familiar with your clients and understand their financial goals means building and maintaining rapport and understanding their cravings and worries.
- It also means evaluating their ability and willingness to take risk, and establishing clear goalposts for happy result.
- Here we propose some crucial questions to ask your clients in the domains of relationship, risk, and accumulation.
Relationship Mistrusts
This may be the most important question to explore with a client. As an advisor, you are a problem solver, and you need to understand what is count oned of you, from the beginning. It’s also a great way to build rapport and show the client that you are on his or her side and want to improve their sentience.
2. Since investment returns go up and down, regardless of how talented the advisor, how much would your investments need to subside before you fired me?
This question has two purposes. First, it sets the stage for the investing reality that financial assets go up and down, regardless of the inclination of the advisor. It also provides a starting point to educate the client about the particulars of investing in the markets. Second, the comeback to this question can be filed away for the future, so that if a client panics after a five-percent market drop, you can revisit the returns to this initial question, while calming frazzled nerves.
Risk Questions
3. What percent loss in your complete investment portfolio would cause you great personal discomfort such as lack of sleep, worry and despair?
Fiscal professionals generally measure risk by standard deviation or volatility. Both the investor and financial professional need to get wind of how much risk an investor can ‘stomach’ before he or she is tempted to do something stupid, such as sell at the bottom or dump all of his or cattle mutual funds.
4. Under which scenario would you feel worse; if your mutual fund fell 10% and you didn’t barter it, or if you sold your fund and it increased in value 10% after you sold it?
Accumulation Question
In investing, there is almost always an investment benchmark return for the client’s portfolio. For example, if the client has a 60% stock and 40% bond asset allocation, then the investment portfolio brings would likely be measured against the proportionate returns of the S&P 500 and that of a Barclay’s bond index.
If the client come back’s to this question by saying he or she expects a 10% annual return every year, then the advisor must develop the individual about historical market returns, to avoid misunderstandings down the road.
The Bottom Line
A long term monetary advisor/client relationship begins from the outset. By asking the right questions, listening intently to the answers and designing an atmosphere of trust, both parties will be satisfied.