5 steps to financially literate clients

Informed investors are easier to work with. Encouraging questions and asking whether they’re happy with their portfolios is helpful, since determining the optimal structure of a client’s account should be a collaborative project. Your client won’t truly own her success if she doesn’t participate in building it.

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Here’s how to help clients understand what you do.

1. Explain your role as a financial advisor.

Kick off the initial meeting by outlining your different financial credentials. Explain what they mean, how you achieved them and how what you do is regulated. If you have the CIM designation, you could explain that you provide discretionary investment management: you can manage money based on pre-determined parameters, without having to discuss every transaction with your client.

You can also assess which investment product is right for her and measure the performance of her portfolio. Let your client know that, to earn your designation, you were required to have at least two years of working experience in financial services and had to complete at least three pre-requisite courses, including the Canadian Securities Course. You also have to meet ongoing continuing education requirements and must abide by a code of ethics. Your credential is also endorsed by both IIROC and the CSA.

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2. Ask about clients’ financial and non-financial needs.

Once those are recorded, discuss how you can meet them. Tell your client about your specific areas of expertise, such as investment advice, retirement planning or real estate management. Explain how you can provide access to other relevant services, such as taxes, accounting or legal support, and why they are important parts of financial planning.

3. Set service and communication expectations.

Discuss how often you’ll communicate with clients via calls, emails, reports and meetings. You should also explain what you must tell them (for example, CRM disclosure requirements) versus what is optional (for example, financial planning tips shared via monthly newsletters).

If someone opts out of the updates, make sure they understand they’ll miss out on market news and financial education.

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4. Encourage questions.

While discussing a client’s needs and goals, encourage her to ask questions so she understands how her financial decisions would impact her life and her portfolio. Would having a diversified portfolio be better for her than investing in a single company or asset class? How should she respond to market fluctuations? Should she make investment decisions based on her longer term plans, such as retirement, or short term ones, such as starting a family?

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5. Help clients build financial knowledge.

Help people access additional information and training so they can build their financial knowledge. Provide monthly quick tips in the form of a newsletter or create a blog with regular updates on trends and developments in sectors they’re invested in. Social media platforms such as Twitter and LinkedIn can provide an effective platform to educate, engage and stay in touch with your clients. Just make sure your compliance department is comfortable with these communications.

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You can also refer your clients to web resources and education programs that provide opportunities for deeper financial education. Websites such as GetSmartAboutMoney.ca or the Financial Consumer Agency of Canada’s Financial Toolkit contain relevant, practical information. Clients that have very limited financial knowledge, or that ask a lot of questions and show interest in a deeper knowledge of various investment strategies and products, the regulatory environment, the relationships between market and economic events and investment performance, and who have even done some DIY investing, would benefit from taking financial courses.

This type of engagement should continue through each stage of your partnership. It will give clients an opportunity to own their choices and be proactive in managing their wealth.

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Simon Parmar is Managing Director of the Canadian Securities Institute (CSI), part of the Training and Certification arm of Moody’s Analytics.