When starting with a new client, there are important things to know before you start planning their financial journey. As a financial advisor , it’s essential to gather as much information as possible, so be sure to ask open ended questions. Never assume what they need or want, instead let them explain their situation. This is an essential part of developing a long term relationship with your client.
Here are 10 Important Questions Advisors Should Ask New Clients
1. What is Your Current Financial Situation?
One of the most important ways to get to know them in the beginning phases of the relationship is to know their background. Knowing a client’s income, debt, expenses, assets, or savings allows you to create a comprehensive financial plan. It also guarantees that your strategy will take their entire financial life into account.
Moreover, identifying their situation helps discover the gaps present in their current plan such as inadequate insurance coverage or insufficient retirement savings. This uncovers opportunities for you, as the advisor, to propose deals to fill those gaps.
2. Do You Have Existing Investments?
By knowing their existing investments, you don’t end up recommending similar products, thus reducing redundancy. Otherwise, it would lead to unnecessary duplication and lack of diversification. Furthermore it can also give you insight to your client’s risk exposure, allowing you to step in and achieve a more balanced portfolio; reducing risk while also aiming for desired returns.
Secondly, by understanding the fees and expenses associated with existing investments helps you create more cost effective options. By knowing the cost structures, you can help your clients improve their investment returns by reducing unnecessary costs. This includes the tax liabilities for existing assets. You can then recommend tax-efficient investment strategies such as tax-loss harvesting.
3. Do you Have Dependents or Family Obligations?
Asking about their dependents would let you know where their financial priorities lie. For example, saving up for their children’s college education may be more important than other investments. This allows you to curate a plan that aligns with their goals of paying for their personal obligations. Dependents also massively impact a client’s budgeting and cash flow. Knowing these details allows advisors to create sustainable budgeting plans to accommodate family needs.
Furthermore, clients with dependents often need adequate life, health, or disability insurance coverages to protect their financial security incase of unforeseen events. This is where you can recommend products that fit their needs while considering the coverage amounts, policy terms, premiums, and financial strengths of the providers.
4. What is Your Risk Tolerance?
You as an advisor have a fiduciary duty to act in the best interest of your client. Assessing their risk tolerance is essential for financial planning that fits their needs, fulfilling your task as an advisor. It is also important for long-term planning. Clients with low risk tolerance would more likely prefer conservative investments while those with higher risk tolerance would prefer more aggressive growth strategies.
Asking about their risk tolerance also builds more trust. The more trust there is in your relationship with your client, the more likely they will take your advice and recommendations.
5. Do You Have Experience With Investing?
Knowing someone’s experience can massively alter your strategy, investment recommendations, and even communication. Those with little investment experience may have unrealistic expectations on returns due to their lack of knowledge on market volatility. Advisors can help set adequate predictions and help understand potential risks and awards.
Furthermore, the level of detail and complexities during communication must be adjusted based on client experience. Beginners may benefit from simpler explanations along with more frequent check-ins. Whereas more experienced clients may benefit from technical jargon or in depth analysis.
Lastly, those with less experience may make common mistakes like poor market timing, lack of diversification, or emotional reactions to market changes. You can help with these common missteps if you are aware of their background regarding investments.
6. What are Your Primary Concerns or Fears?
Understanding your client’s fears or concerns contribute massively to a positive relationship. It establishes you as their go-to guide when faced with complex financial concerns. Advising is not a one-time transaction but an ongoing partnership which needs trust to foster. The key is empathy: by hearing your client out, they feel that you are their companion in their financial journey rather than a salesman. Subsequently, their trust in you manifests into retention and loyalty.
Secondly, your clients’ concerns may change over time, due to personal life events, economic conditions, etc. Therefore, it’s important to stay connected and ask questions regarding this topic periodically to check in.
7. What are Your Financial Goals?
It is obviously one of the most important questions to ask. It is always important to be prepared for their answer to this question as clients have a variety of goals they want to reach. This includes: retirement planning, home ownership, education funding, debt reduction, emergency funds, healthcare planning, or even starting a business.
Some people may not have a clear understanding of what their goals are exactly. It can be your job to help polish up their plan and help them set their expectations. Besides creating a comprehensive plan for your client, this question allows you to measure progress. Clearly defined goals are beneficial for setting benchmarks to track throughout their journey.
8. What is Your Timeline for Your Financial Goals?
Understanding the timeline is important in the beginning stages of planning. It allows you to prioritize certain goals over others. This allows your plan to move smoothly with minimal setbacks from poor planning.
Furthermore, people feel more comfortable when there is a structured path to follow regarding their finances. The less stressed or anxious they are, the more likely they will follow the plan and achieve their goals, making their financial journey pleasant and worry-free. When your client also sees that their journey is going well, they feel more confident in you as their advisor.
9. What are Your Expectations on Your investments?
This question is also part of the early planning process as it allows you to know exactly what they want to get out of their achievements. You as the professional can point out whether their goals are realistic or too ambitious. Either way you can inform them of the services you can provide to help achieve their goals. However, be sure to remind them of the fees and costs of their goals as clients could feel disappointed or even blindsighted without this crucial information.
These open conversations also allow you to impress your clients by either reaching or exceeding their initial objectives. This leads to higher satisfaction and retention, which massively benefits your professional growth.
10.How do I reach you?
This last question is one of the easiest but also most important. Since you are trying to build long lasting relationships with your clients, you need an easy way to contact them. This may come up in emergency situations or even just to catch up. It’s never a harm to simply reach out, and communicate. Thus, it is important to know exactly how to reach them and what is the most convenient way.
Though there is no one-size-fit-all solution for the ice breaker stage with your client, these questions could assist you in getting to know them and proceed on their financial journey. Lastly, never stop learning and finding new ways to achieve goals, talk to clients, and drive success.