5 important questions consultants should ask new clients

The relationship between financial advisers and clients is a delicate one. Dealing with the client’s financial future is a major responsibility of the consultant. How you connect with your original customers and the questions you ask can mean a long-term relationship that is productive, trusting each other, or the difference between losing customers.

Ask these five questions to build trust and build a long-term financial advisor-client relationship. The following query will show customers the platform you want to know about them and create a transparent relationship. By starting right, future misunderstandings can be minimized.

These issues fall into three main categories: relationships, risks, and wealth accumulation.

Key points

  • Successful financial advisors understand that their business is more than just making market recommendations.
  • Knowing your customers and understanding their financial goals means building and maintaining rapport and understanding their hopes and concerns.
  • This also means assessing their ability and willingness to take risks and establishing clear goals for success.
  • Here, we raise some key questions to ask your customers in the areas of relationship, risk, and accumulation.

Relationship problem

1. What is your biggest financial worry, and how do you want me to solve it with you?

This may be the most important question to discuss with the customer. As a consultant, you are a problem solver and you need to understand what is expected of you from the beginning. This is also a great way to build rapport and show customers that you are on their side and want to improve their lives.

2. Since investment returns have risen and fallen, no matter how talented the consultant is, how much does your investment need to fall before you fire me?

This question serves two purposes. First, it lays the foundation for the investment reality of rising and falling financial assets, regardless of the adviser’s talents. It also provides a starting point for customers to understand the details of the investment market. Secondly, the answer to this question can be saved for the future, so that if a customer panics after the market drops by 5%, you can re-examine the answer to this initial question and at the same time soothe tired nerves.

Risk question

3. What percentage of your overall investment portfolio loss will cause your personal discomfort, such as lack of sleep, worry, and despair?

Financial professionals usually measure risk by standard deviation or volatility. Both investors and financial professionals need to understand how much risk investors can “tolerate” before they can make unwise moves, such as selling or dumping all stock mutual funds at the bottom.

4. In which situation would you feel worse: if your mutual fund fell by 10% and you did not sell it, or if you sold your fund and its value increased after you sold it​​ 10%?

Behavioral finance theory generally believes that investors feel worse about losses than comparable gains. Evaluating people’s feelings about watching their investments fall and sell, and then observing investment returns can provide insights into investors’ risk tolerance. To get some real-life data, you may need to follow up and ask if this situation has ever happened.

Understanding the client’s risk tolerance can also help advisers and clients determine the overall portfolio asset allocation. Investors with a higher degree of risk aversion will tend to allocate more bonds and fixed asset classes, reducing the proportion of volatile stocks and equity mutual funds.

Accumulation problem

5. How will you measure the success of your financial investment portfolio?

In investment, the customer’s investment portfolio usually has an investment benchmark return. For example, if the client owns 60% of stocks and 40% of bond asset allocation, then the return on the investment portfolio may be measured based on the proportional returns of the S&P 500 Index and the Barclays Bond Index.

If the client answers this question and says that they expect a 10% annual return each year, then the consultant must educate the individual about historical market returns to avoid misunderstandings on the road.

Bottom line

The long-term financial advisor-client relationship starts from the very beginning. By asking the right questions, listening attentively to the answers, and creating an atmosphere of trust, both parties will be satisfied.


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