Add value — educate your clients

By Tom Hamza | June 15, 2007 | Last updated on June 15, 2007
4 min read

(June 2007) It doesn’t take a psychologist to interpret the look in your client’s face but that nod of agreement could be coming from a client with a CFA who understands the topic just as well as you do, or it could be coming from a client who barely understands what you are talking about. Should you take your client’s nod at face value, or should you probe more deeply to make sure that they understand?

Part of your role as a good advisor is to ensure that your client understands how you intend to grow their portfolio. You need to look beyond their head-nodding to determine if they really understand the strategy and products that you are talking about. The opportunity to clearly explain the products, why they make sense and how they logically fit into your client’s portfolio is an opportunity to provide real value added to the client’s experience.

As investor educators, we’ve put together a brief list of things that your client should understand. Use this as a mental checklist when you are determining whether they “get” what you are saying.

Goals and strategy: Do your clients know why this is a good recommendation?

You already know that every recommendation that you make as an advisor must be in the context of the strategy you have developed together. However, it is important that you consciously refer to this strategy in the context of every recommendation you make so the client understands how each decision is consistent with the long-term plan.

Every time you make reference to this strategy, you demonstrate that you know your client’s needs and that you consistently use the strategy as a filter for decision-making. Since you should already assess your recommendations this way, it shouldn’t take much effort to make your client aware that this is how you think.

Risks: Your clients need to know

You understand risk and use it as the cornerstone of every bit of advice you give. That’s great, but do your clients have the same comfort level or understanding?

You know that there is some risk related to most investments. Taking a moment to provide a detailed description of the risk — market risk, sector risk or company risk — is information that gives your client the confidence that you know what you are doing. For more on how other advisors effectively explain risk to clients, click here to read the article Beyond KYC.

Even if they never ask about the downside, it doesn’t mean they are oblivious to it. Disclosing risk upfront, and discussing ways to mitigate risk, are critical to providing a clear picture to your client. Providing this full context adds value and clients are more confident about the decision and about their decision to have you as their advisor.

Costs: Your clients value candor

Studies show that the Canadian investing public does not consistently understand how advisors are paid but there is a good chance your client has read an article or passing reference and wondered about how the relationship works (in commission situations especially). This is an area of mystery you would do well to shed some light on.

The client who knows about commissions, sales charges, service charges, transaction fees, etc. is in a better position to evaluate your services. Full cost disclosure is not just good professional conduct, it can also be a differentiator.

Regular contact

Many of your clients will briefly think of their portfolio once a month when they get their statements. Some of them will think of their portfolio less often than that. They may not even read their statements.

A client who is aware of how their portfolio is doing is less likely to make alarming decisions in response to their sporadic focus on performance. You need your client to understand the value of these documents and see them like a report card of account performance.

Always ask clients if they have been receiving their statements and if they have questions. Statements can help add context to your conversations. It also helps if clients understand they are expected to read their statements so that your conversations with them will be more effective.

Educating your client

Some investors need the time to step back and contemplate or research what you are recommending, while others need space just to figure out what you’ve just said. If you have novice or intermediate investors, you can help them educate themselves by sending them to the Investor Educations Fund’s website at It is a great place for investors to learn more about investments and investing in general. It also helps you develop credibility by taking the time to educate your client.

You’ll benefit if you actively think about how you can show your client you are acting their best interests. Although you should know all of the information related to your recommendations, don’t assume your client does. Taking the time to consciously educate your clients is a good way to add value to your relationships.

Tom Hamza is president of the Investor Education Fund. For more information, visit

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Tom Hamza