Understanding clients and helping clients understand

By Shawn O'Brien | June 19, 2013 | Last updated on June 19, 2013
3 min read

The role of a financial advisor is simple. Our primary responsibility is to help clients identify where they are now and where they need to go. Along the way we also help clients separate their emotions and make decisions using a sound intellectual framework. So why does our community continue to worry about client reactions to short-term underperformance?

Biggest client stressors

Most Canadians would agree that their biggest financial stressor is whether or not they’ll be able to retire in comfort. How many times have you been asked how much money you’ll need to maintain your current lifestyle? Without knowing the answer to this question, is there any wonder why clients abandon their portfolios in difficult times? If you have not attached your client’s portfolio to a retirement analysis, your client is far more likely to be focused on the short term instead of the overall performance their plan requires.

Fail to plan

There are more than 85,000 financial advisors in Canada today. I often wonder how many advisors actually update their clients’ financial plans on an annual basis. Why do we as an industry place so little emphasis on planning? In a survey I conducted with clients a few years back, concerns about performance were notably different for those who had financial plans and those who didn’t. One client actually said their advisor used to be a mutual fund salesperson but today he is a practitioner. The client also said they have a financial plan and investment policy statement in place that determines how their portfolio should be managed and that he no longer worries about short-term performance — his is on “our” plan.

The number

Lee Eisenberg’s (formerly of Esquire and Time Magazine) book, The Number, goes beyond retirement projections to help readers understand how they will live in their retirement years. The public is starved for this information. I found Lee’s ideas to be similar to those in David Chilton’s book, The Wealthy Barber — both books cover the spectrum of financial advice, from “pay yourself first” to “how much is enough?”

What is their number?

If you are a financial advisor that doesn’t conduct financial plans, it isn’t too late. If you don’t have the propensity to conduct plans, hire someone who does. Great companies identify stressors within their marketplace and develop products or services to alleviate that stress. A financial plan is your business’s product and service.

Pain is greater than gain

Pain is a greater motivator than the promise of gain. That is why today is an ideal time to start planning for clients. January statements will cause worry — don’t wait until then to respond. By reaching out now, you have the opportunity to be proactive and demonstrate that you care about your client’s well-being. Implicit trust is often earned in difficult times.

Tools for planning

All of us have access to a myriad of planning tools to work with. I have a few suggestions for using them: First, don’t practise “planning by the pound.” Some advisors say bigger is better, but I don’t believe this to be true. A financial plan should be broken into modules and completed over a 6- to 12-month period of time. The direction should be based on your client’s needs. A financial plan should be visual and set realistic expectations. Another important tool is the investment policy statement or IPS. When used effectively, a client should feel their portfolio has been created especially for them, based on their own unique circumstances.

Stay current

I want to congratulate those of you who already create financial plans, but I do have one question: Do you keep your plans current? A plan has a shelf life. It should be reviewed annually and modified when there are material changes that affect the required outcome.

Shawn O’Brien is the vice-president of national sales at Investment Planning Counsel.

Shawn O’Brien