Important tips for the annual client financial review

One of the best things financial advisors can provide clients is to conduct an annual review of their financial situation. Although this seems intuitive, not all consultants do it.

These meetings are beneficial to clients and financial advisors alike. Although, ideally, communication will continue throughout the year, face-to-face meetings dedicated to discussing where the customer is and the changes that may have occurred in the past 12 months can lead to more in-depth conversations or phone calls than quick emails.

Below are some tips for conducting meaningful client financial reviews and a list of questions that should be answered during such meetings.

Key points

  • Financial advisors should hold annual review meetings with their clients so that everyone can reach consensus on the current state, any changes, and future goals.
  • The annual review should go beyond financial discussions and should also cover any personal changes.
  • The areas discussed with clients should include their investment portfolio, tax planning, estate planning, retirement planning and life insurance policy.

More than just review investment

The review of the client’s investment portfolio is of course a key reason for the financial review. The review led to a discussion about how the client’s financial plan compares to their financial plan and how they can achieve various goals, such as saving for retirement and college.

However, the real value of these meetings lies outside these obvious topics. You need to ask customers what happened in their lives to determine how this might affect what you do for them. Key information may include their current employment/occupation status, any health issues, or any changes in the customer’s perception of risks.

Asset allocation

This is one of the most important review elements.​​​ Is the client’s allocation within the target range listed in the investment plan? Especially in the case of any volatility in the market, it is not surprising if the investment portfolio needs to be rebalanced back to the target range.

Moreover, is the target asset allocation still suitable for their situation? Is the client dissatisfied with any financial decisions or economic prospects?

Tax Planning

Although tax considerations should not drive investment decisions, tax planning is still important. Are the client’s assets in the appropriate account? For those with charitable inclinations, are there any appreciation securities that can be used to make donations in a tax-efficient way?

Has the customer’s revenue changed significantly? If their income this year will decrease, perhaps it may be appropriate to convert some of their traditional IRA assets to Roth IRA.

Tax planning should include assessing the individual’s current age tax class and expected tax class at retirement.

Keeping up with tax laws and any changes made by the Internal Revenue Service (IRS) is critical, as it may require some adjustments that your customers can take advantage of.

Estate planning issues

If there is no other reason, except that many clients do not like to consider their own mortality rate, this is usually an area that has been pushed aside. However, you must ensure that if the customer dies suddenly, their asset allocation wishes will be met.

Some issues are easy to solve, such as ensuring that the beneficiary designations on retirement accounts and life insurance policies are up to date and reflect the current wishes of the client.

It is important to ensure that all retirement accounts, related employee benefits, life insurance policies and other benefits are designated through the beneficiary designation on such designated delivery tools and should be reviewed regularly. These tools rely on the designation of the beneficiary, not the wishes of the customer.

The annual review is also the time for the client to evaluate the performance of the financial advisor and whether the relationship is still compatible.

In addition, I would like to ask: Has the customer’s family situation changed? Is there another child or grandson to consider? Is the client married? Is the client divorced? Is their spouse dead?

For customers with minor children, if the customer dies, they must appoint a guardian for these children. Financial advisors should urge them to provide this in writing in the estate planning document and ensure that they are reviewed regularly with clients to ensure that they are still willing and able to assume this role when needed.

Retirement plan issues

Regardless of the age of the client, there will always be some retirement planning issues that need to be resolved.

For customers in the accumulation stage: Are they accumulating enough funds for retirement? Although this number may be difficult to determine for customers 20 years or more away from retirement, the key is to ensure that customers save as much as possible through their 401(k) plans and other tools to provide a reasonable realization Stable retirement.

For customers within 10 years of retirement, the problem is more critical and specific. Does the client have a fairly clear understanding of their retirement life? Ideally, how long are they willing to work? How much does their lifestyle cost?

Will changes in couples’ social security claim strategies affect their retirement plans? How will they pay for medical expenses after retirement?

Financial advisors should ensure that clients at this stage of their lives can accept all potential sources of retirement income. In addition to 401(k) accounts, IRA and taxable investments, pensions, and social security should also be considered.

Is the client eligible to receive a pension from the old employer? Do they keep in touch with the employer to ensure that the company knows that they can be contacted when deciding how to withdraw the pension?

Insurance issues

Did the customer purchase enough life insurance for their situation? Young parents usually need large sums of death compensation, and some form of term insurance is usually appropriate.

Older clients may need to ensure sufficient retirement income for surviving spouses or estate planning purposes. In the latter case, a death benefit may be required to pay estate taxes for clients with larger estates. Financial advisors can play a key role in helping clients get the right amount and the right type of policies to meet their needs.

Clients in working years should have disability insurance, whether through their employer or private insurance. Finally, don’t neglect the policy of protecting customers’ houses and responsibilities.

Bottom line

Sit down with clients to conduct a formal review of their overall financial situation, which is valuable to clients and financial advisors alike. Customers can fully understand whether they have developed a financial plan. The consultant has an in-depth understanding of the client’s attitude and knows where and how to advise them in helping them achieve their financial goals.


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