Financial advice is not a one-type-fits-all industry, and your ability to identify your clients' preferences, objectives and values will be a factor that sets your business apart from others.
In this article we will help you to:
Identify the different types of client needs
Develop a structure for your initial client meeting
Understand the value of the advice you give
Recognise the importance of understanding your clients’ needs
Learn the challenges you might face, and solutions to these, when meeting clients’ needs
Creating loyal long-term, clients through providing a service that is valued, along with keeping your client promise, is fundamental to developing a strong client portfolio. Understanding the individual needs of each and every one of your clients is similarly important.
As we have mentioned, every client is different and hence every client will have their own investment priorities. It is useful to consider the following aspects of investment when working for each of your clients, to ensure that your offering aligns with their priorities.
Financial goals
As an adviser, understanding your client’s financial goals is, of course, vital to ensure that your investment strategy is in alignment. However, to truly realise these goals you may need to develop your relationship with your client on a somewhat deeper level than just through a conversation at your initial meeting. Engaging in effective communication with your client on an ongoing basis will enable you to understand your client in greater detail and gain a full understanding of their priorities.
Some actions you can take to increase your understanding of your client might include:
Asking open-ended questions to encourage your client to share their aspirations. For example, “What do you envisage your retirement looking like?” or “What dreams do you have that you would like to realise?”
Practising active listening: pay close attention to your client’s responses and take note of their priorities, concerns and values to help guide your recommendations.
Reviewing and rebalancing your client’s portfolio on a regular basis to ensure that it is aligned with their goals.
By using a combination of effective communication and analysis, you can provide your clients with personalised financial recommendations and build long-lasting relationships based on trust.
Risk tolerance
Understanding and meeting your client’s needs means knowing how much risk they are prepared to accept. You may find that this aspect varies according to their age and stage in life, with younger clients (with potentially a longer time horizon) being more open to risk than a client who is approaching retirement.
To find out your client’s true opinion on risk, asking open-ended questions is a good approach, encouraging them to share their thoughts. You could ask, for example, “How would you feel if your investments lost value?” Based on their response, you can put together an appropriate portfolio accordingly.
It is good practice to review your client’s risk tolerance on a regular basis to ensure that their investments align. You can do this through a simple conversation, asking them their current view on risk, and then talking through their portfolio as it currently stands. Make adjustments to their portfolio as needed to ensure that it fits within the appropriate parameters of their tolerance and complete any necessary documentation to record this. You can also use our 'attitude to risk' tool to help you.
Investment preferences
It is necessary to understand your client’s investment preferences to make investment decisions with which they will be comfortable. Reviewing their past investment history, if they have one, is a good way to understand the approach they have taken historically and recognise any patterns within their investment decisions.
Being an adviser who listens to their clients, takes on board their values and works within their requested parameters will bring you more credibility with your clients and greater long-term loyalty from them.
Personal values
Understanding a client’s preferences towards environmental, social and governance (ESG) is an increasingly important part of the advice process. Are they happy with a traditional investment approach, are there certain types of company they want to exclude, or are ESG issues their most pressing concern? It is essential that you understand these preferences in order to formulate the right investment solution.
Time horizon
A client’s time horizon (the amount of time your client intends on holding on to an investment before liquidating it) could vary from relatively short-term, i.e. saving for a deposit for a property, to long-term, i.e. retirement planning. Understanding this can greatly affect your investment planning for your client.
At the first meeting, it is important to find out your client’s goals and understand exactly the parameters you will be working within. A client with a long-term horizon could potentially have a greater risk tolerance than one with a short-term horizon who may need to be more conservative and protect themselves from any potential short-term losses.
By understanding when your client will need to access their money, you can create a financial plan that aims to achieve their goals in this timeframe, tailoring their investment portfolio to their unique circumstances.
Communication preferences
Frequent proactive communication is vital to developing a loyal long-term relationship with your client. But not all clients like to be contacted the same way, and understanding how often, and in what format, your client would appreciate hearing from you will help to establish clear lines of communication.
It is worth taking the time to discuss with your client the methods of communication that meet their expectations and make them feel comfortable. They may like regular updates regarding their finances by email or perhaps prefer a face-to-face meeting every quarter. Whichever the preference, understanding it and delivering to these stipulations will build their trust and confidence in you and encourage their loyalty.
Understanding the client’s “why”
Whilst it is useful to have the structured parameters agreed around time, risk and investment preferences so you can build a suitable investment strategy and fulfil the specifics of the “Know your client” questionnaire, finding out your client’s “why” provides another facet to the information. Connecting the emotional and practical aspects of the investment strategy can be beneficial to the client as well as the adviser. By understanding the emotional importance of some of your client’s goals compared to others, you can then deduce what the client’s required return may actually be. Knowing the “why” can enable you to prioritise some goals over others to work towards their objectives.
Your initial meeting with a new client is the first opportunity you will have (and possibly the most important) to establish their goals and deduce how you intend to structure their portfolio to provide the best chances of reaching them. As the saying goes, you only have one chance to make a first impression! Having a well-formulated, structured approach to the initial meeting can ensure that you cover all areas of importance and create a solid foundation for a loyal long-term relationship.
Create transparency and build trust for your meeting with an agenda. Be aware that you will still need to be flexible as the conversation may steer in a different direction.
Ensure you only ask for what you really need. Note that some clients may not want to reveal too much personal information in one go and especially not at this early stage in your client/adviser relationship.
As with documentation, don’t ask too much or your client may be deterred. By asking them a few open-ended, goal-oriented questions to think about before you meet, you can find out more about your client’s interests, objectives and financial plans.
These could be around communication preferences or remuneration, for example. If the question is remuneration based, be transparent and help your client to understand that your advice is an investment, not a cost.
Creating a simple financial plan with your client should enable you to be seen as the guide in a changing landscape, not the defender of a changing plan.
Ongoing client meetings are, of course, still important and should be approached in a way that enables you to build on your relationship with the client, gather important information, address any concerns and identify new opportunities. Taking advantage of these face-to-face opportunities can help you understand your client more, and therefore enable you to provide value to them in the areas they most appreciate.
Aspects from the initial meeting that you could continue for all your client meetings include:
Working within a structure, i.e. an agenda to ensure the meeting’s content is transparent, can be added to by the client and the conversation stays directed to the necessary items. For advisers who are all too frequently time-poor, this is also a useful tool to keep the meeting on track.
Keeping your open-ended questions list to hand for all client meetings. There may be an opportunity where you feel the discussion could go deeper and having the questions readily available will be a useful aide-memoire.
Knowing what documents you may require from your client for each meeting and giving them plenty of warning to get the necessary information together.
Update the short financial plan at every meeting to ensure that the goals are up to date and the plan is current. This should be a living document so continue to use it throughout the client’s journey with you.
Knowing what your clients value and how they measure the price: performance ratio is of utmost importance. However, it can be difficult to assess because success means something different to every client. To help measure this, at Vanguard we follow a four-part model for evaluating professional advice. The model is based on the following areas: portfolio-level outcomes, financial outcomes and emotional added-value and time value.
Encompasses optimal portfolio construction and risk structure for the client, taking into consideration the risk/return profile, tax efficiency, fees and rebalancing and trading.
Concerns the implementation of financial targets, which includes saving and spending behaviour, debts, retirement provision, insurance and risk management and estate and inheritance planning.
Can be described as having inner peace in financial terms. This can be measured by the trust your client has in their adviser and the markets, and their confidence in the financial activity that has been undertaken.
Relates to the time benefit received by clients when considering that the tasks advisers perform are normally those that their clients may not have the time or knowledge to undertake on their own.
One straightforward approach to this is to ask your clients to complete a survey, the results of which can prove useful in influencing service delivery, supporting client retention and identifying key marketing messages.
We have written a how-to guide for this type of survey, including the survey questions, rating scale and covering letter template, so you can circulate this easily to your clients. Consult our article Determine your added value with customer surveys for a step-by-step approach.
Providing your client with a service in which they can see the value will increase client satisfaction and loyalty and encourage a long-term trusting relationship.
Just as a doctor takes the time to understand their patient’s symptoms, understand their medical history and perform an examination before making a diagnosis and prescribing a treatment plan, so must an adviser take the time to understand their client’s financial goals, risk tolerance and financial situation before they make their recommendations.
Without properly understanding their client’s situation, an adviser could miss out on providing the best advice, aligned with the client’s values, goals and risk tolerance. Gathering this relevant information enables a strong relationship of trust and loyalty to be formed.
There are many benefits to be gained from understanding your client’s needs.
By understanding your client’s needs you can ensure that the investment approach you suggest is most aligned with their values, their priorities, their time horizon and their risk tolerance. In this way, you can be assured that your advice is tailored to their needs exactly.
Providing tailored advice will build trust and loyalty from your client, as it is tangible evidence that you have taken the time to understand and value them and their business.
Producing an investment strategy aligned with their values, goals and parameters may enable a more personalised investment portfolio to be created.
By continually assessing and rebalancing their portfolio, you can encourage the best long-term outcomes for your client.
The cycle of trust, loyalty and, hopefully, advocacy will continue long-term as you continue to provide personalised investment advice for your client.
Taking the time to understand and meet your client’s needs is critical to building a strong, stable client relationship, and a client with whom you have a strong relationship will be your most loyal client and biggest advocate.
Whilst it is easy to write about the benefits of understanding your client and meeting their needs, it is a fact of life that sometimes this won’t always go to plan and that things may go wrong. In this section we consider the potential challenges you may face whilst trying to fulfil your client’s requirements and offer solutions to help resolve these, leaving you with a clear pathway to build relationships, gain trust and maintain loyal clients.
Competing priorities
All too frequently there are huge demands on our time during work hours and beyond, and the ability to fit everything into a working day seems impossible. Of course, this is a common problem in many businesses but, as a financial adviser, the key is to prioritise your clients and delegate or automate other tasks. Taking stock of your in-house systems and deducing if there would be a benefit in updating them or recruiting more staff could both be options. You may wish to read our article Implementing change to consider whether amending your systems and processes will enable a better, more efficient, client journey.
Automate where possible
Many aspects of a financial-advice practice require a human touch, but equally many can be – and should be – automated, especially where doing so can remove the chance of human error and free up time for other more value-add activities. In our paper Quantifying the investor’s view on human and robo-advice: the value, benefit and opportunities, the benefit of automating functions is discussed in detail alongside a commentary on the research findings. It states: “Across all generations, wealth levels and advice-delivery types, clients suggest that human financial advisers should consider automation to outsource portfolio construction.”
We have seen through this research that it is the tasks that give the most emotional or financial value that clients prefer to be carried out by humans. Automate functions where there is no value to be added by humans, and where doing so is quicker and avoids the potential for human error.
Communication is key
E.M. Forster wrote the often-quoted phrase in Howard’s End, “Only connect…” Gaining a connection with your client is paramount and communication with them should be your highest priority.
Be proactive with your client communication and devise a communication plan with them so you know what your clients expect and they know how you intend to deliver. Simple things, like returning phone calls and emails promptly, show clients that they are important. Correspond in the manner your client prefers and always deliver on your communication promises.
Expectation management
The act of setting up a simple written financial plan in your first client meeting is worth the investment of time and effort. While undertaking the process itself will benefit both you and your client by enabling you to gain a deeper understanding of the client’s financial and emotional goals, aims and their “why”, it will also form a tangible record of what you would like to achieve to keep their investment strategy on the right approach.
Only by truly understanding your client’s needs can you be sure that you are meeting them. Taking the time to get to know your client, their values, goals, risk tolerance, investment preferences, time horizon and communication preferences is the best way to ensure that you will be able to do this.
By understanding, and then meeting your client’s needs, you can foster a trusting, loyal relationship with your client, offering solutions that are tailored to their requirements and values, and that will work with them to achieve their goals. In this way, you can hope to set up a long-term, mutually beneficial relationship.
Take a moment to consider your initial client meetings. Do you have a framework you operate with or do you approach each meeting differently and ad hoc?
Write your own list of open-ended questions you could refer to in your client meetings to help find out more about your clients’ values, goals, aims and aspirations. Keep this list accessible for all meetings and try to ask at least one question from the list at every client meeting you hold for a month. Has doing this given you a different insight into your clients?
Read our article Determine your added value with customer surveys and start the process of developing a client survey for your business. What questions do you want to be answered by the survey? Which clients will you ask to complete it?
To spend more time building relationships with your clients, consider which aspects of your business you may be able to automate. Are there any processes that are currently carried out manually which could be automated? Meet with your team to discuss this and gain their buy-in. Then read Implementing change to understand the best ways to make these improvements for your business.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Important information
The information contained in this article is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this article when making any investment decisions.
The information contained in this article is for educational purposes only and is not a recommendation or solicitation to buy or sell investments.