As you might imagine there are innumerable financial planning software tools available to financial planners and individuals. Technology is a wonderful thing for our profession and more importantly for the clients we serve. To this financial planner, however, asking questions and the dialog this creates might be the most important financial planning tool of all.
The initial conversation
When I first speak with a prospective client, either in person of via a phone call, I ask many questions. Let’s assume the prospective client is his/her 50s and approaching retirement. The main question I generally ask in one form or another:
What prompted you to contact a financial planner? My main objective is uncovering their “pain point” or what is bothering them financially. The issue often surrounds their retirement readiness in the case of a pre-retiree or managing retirement withdrawals in the case of someone in retirement or on the cusp of retirement. Often this single question will get the prospective client to me all about his or her financial concerns. My preference is to do as much listening and as little taking as possible during this conversation.
During this initial conversation I want to learn several things which I use questions to accomplish. These include:
- Understanding their financial resources.
- Understanding their spending needs in retirement.
- Understanding their vision of their retirement.
These items are crucial to me in that I want to understand if this person has reasonable expectations as to the type of retirement lifestyle his or her financial resources will support. It is also vital to understand if this prospective client has realistic financial expectations in general.
By this point we should both have a good feel if there is a potential match. Am I a financial advisor in whom they have confidence and with whom they want to work to achieve their financial goals? On the flip side I also have to make a determination if this is a client to whom I can add value. Questions back and forth will have allowed both of us to make that determination. If I feel that I am not the right fit for an individual I will make every effort to refer them to another advisor that I feel would be a better fit for their situation.
Client data gathering-quantitative
Once someone becomes a client the questions not only continue, but they accelerate. Certainly there are quantitative questions known as data gathering. The types of informational questions most advisors ask include:
- Statements or similar information for all retirement and investment accounts.
- Cash holdings.
- Other signification assets such as real estate, an interest in a business, a potential inheritance, etc.
- Information about life insurance, disability, and long-term care policies as well as any annuities in force.
- Social Security statements.
- Information about pensions and other retirement accounts not covered above.
- Information about the client’s employee benefits if they are working.
- A copy of their most recent tax return.
- Cash flow data if spending is an issue for the client.
- Any additional financial data that is relevant.
The reasons for asking these questions and requesting this quantitative data I think are pretty obvious.
Client data gathering-qualitative
Beyond the numbers and dollar amounts I generally ask many questions both initially with a new client and periodically when we meet to review their situation:
- When do you see yourself retiring?
- How do envision spending your retirement years?
- Where do you envision living during retirement?
- What are you goals?
- College educations?
- Retirement?
- Travel?
- Starting a business?
- Do you have parents that you will need to support?
- What does your monthly cash flow look like?
- Has anything changed in life?
- How is your health?
- Do you have any major cash flow needs over the next 12 months?
This is only a sample of the types of questions that I ask clients on a regular basis. Of course not all of these questions are applicable to every client and for some clients the questions will be somewhat different.
As you can see, the answers to these and other questions can carry significant financial ramifications for people. It is vital that I understand these types of issues as they concern my clients.
If you are doing your own financial planning, it is critical that you step back from your own situation and ask yourself these questions and that you discuss them with your spouse or significant other if applicable.
In my experience questions are among the most powerful financial planning tools available. Make sure that your financial advisor is asking the right questions of you or that you are asking the right questions of yourself.
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Asking good questions is a great way to connect with a client. When it is done just for the sake of “qualifying” a person- it loses it’s original intent- which is to see how you can help them. Make sure that even if it isn’t a good match, that you have other Advisors that you can refer them to. That keeps the spirit of the conversation in the right direction.
Fern thanks for the comment. I agree and questions are a good way for both a potential client and the advisor to determine if forming a relationship would be mutually beneficial. It goes beyond the person’s level of assets, but rather can I help this person achieve their goals, address their financial issues, etc.? If I can’t I try to find them someone who is better suited to their needs.
Great stuff Roger. I see so many financial advisors sell themselves solely on the basis of recent investment returns when that’s such a small part of the value a good planner can offer. Truly understanding the client and what their particular goals and desires are is really how you can provide a valuable service. In the end, money is just a tool to help us live our lives the way we want. That has much more to do with the personal aspect of the relationship than it has to do with investment returns.
Thanks for the comment Matt and very well said.
Roger, terrific write-up and comments on the power of questions. In my experience, questions help us uncover the two key criteria which form the basis of a long-term successful client/advisor relationship. First, can we genuinely help the client? Second, are we a good fit for each other (i.e., do we like each other)? If we can’t answer “yes” to both questions, then as you and others point out, we need to arrange an introduction to another financial professional that can better serve them.
Thanks for the comment Ron. I’m always glad to see other advisors who share the “put the client first” mindset that is too often lacking in our industry.