Know Your Clients: Data-Gathering Techniques for Financial Advisors

Posted by Patrick Sarne

February 24, 2015 at 10:00 AM

Data-Gathering Techniques for Financial AdvisorsIn their 2003 book, Wealth Management: The New Business Model for Financial Advisors, Russ Alan Prince and Hannah Shaw Grove argue that the wealth management model, and its holistic life-planning approach, is the wave of the future. (And from where I'm sitting today, this certainly seems to be the case.) They help advisors determine if the wealth management model is right for them and the best way to adopt the approach. But the topic in their book that really got me thinking was their description of how to gather client information.

Traditionally, data-gathering techniques for financial advisors involve asking clients or prospects to bring in account statements, insurance policies, 401(k) plan options, and maybe tax returns. To be sure, it's a great foundation for helping families better themselves and reach their goals. But does this method merely answer the question instead of solving the problem?

How do you gain knowledge when using data-gathering techniques to truly know your client?

Dig into the Details

Try seeing yourself as a valued consultant—someone who wants to build a client relationship rather than just generate a sale. Prince and Grove quantify this consultative process into six areas and offer artful ways to delve into them.

1) Goals

Ask questions such as:

  • What are your personal and professional goals?
  • What do you want (or feel obligated) to do for your spouse, children, other family members, friends, society, and the world at large?

This is the foundation on which your recommendations will stand. You might uncover, for example, the client's timeline for retirement and his or her desired lifestyle in retirement. Needs for college funding or elder care might also be discovered. You can then enter this information into your preferred financial planning software (e.g., MoneyGuidePro®, NaviPlan, Money Tree).

2) Relationships

The questions you ask in this area are obviously more personal:

  • Which family relationships (e.g., spouse, children, siblings, parents) are most important to you?
  • What is your religious orientation? How devout are you?

This may lead to a discussion on insurance needs, desires to support philanthropic causes, or a need for a family or charitable trust.

3) Assets

Here, you want to dig into investment-related matters with questions including:

  • How are your assets structured? In whose name are they registered (e.g., yours, your spouse's, a corporation's)?
  • How do you make money? How is that likely to change in the next three years?

Taxes can have a significant impact on your client's likelihood of achieving his or her goals. Tax liability can be minimized with a proper account structure. Changes in the client's current and future propensity to save or spend play a vital role in his or her financial situation. Your ability to properly incorporate these considerations will increase your chances for success in helping your clients reach their goals.

4) Advisors

Probe to learn more about existing professional relationships:

  • Do you work with other advisors? Who are they and what are their roles?
  • Of late, how frequently have you switched advisors?

Try to gain a better understanding of your client's existing relationships. It could be a chance to expand your own centers of influence and potentially establish fee-sharing arrangements with these individuals. Knowing why clients have decided to join or leave an advisor may help you avoid a relationship that has more burden than benefit.

5) Process

Administrative details are important as well, so be sure you ask:

  • How many times would you like to be contacted each year? How would you like to be contacted (e.g., face-to-face, phone, e-mail)?
  • What security measures are you using to protect your personal and financial information?

It's vital to understand your clients' expectations of the relationship to see how they complement your service and fee schedules. It's also an opportunity for you to offer additional benefits (identity protection, credit watch, etc.).

6) Interests

Finally, to truly know your clients, try to learn more about their day-to-day lives:

  • What are your favorite activities, TV programs, movies, and sports teams? Do you have any pets or hobbies? Do you travel often?
  • Are health and fitness important to you? If so, what's your regimen?

This personal connection will help solidify the bond between you and the client. It also provides the opportunity to uncover ideas for marketing opportunities or client appreciation events. Can your client's interests lead you to define a niche market? Can your client help generate referrals?

A Deeper Connection

If you understand your clients' explicit and implicit needs, you'll be able to:

  • Provide an extensive range of financial products and services
  • Develop a deeper emotional connection with them
  • Differentiate yourself from the sea of other financial services providers by showing how much more beneficial their relationship can be with you
  • Retain clients when products or the markets aren't performing as anticipated
  • Strengthen your relationships because it makes you an important part of their financial future

Data-gathering techniques for financial advisors need to elicit information from your clients but, at the same time, look past the simple numbers and figures. Whether you're an investment manager or a life planner, just think of the connections you can foster when clients open up their lives to you, rather than just their checkbooks.

What can you recommend as the best data-gathering techniques for financial advisors? Please share with us below.

Time for a Checkup: The Financial Plan Audit

Topics: Financial Planning

Commonwealth Business Review
5 Ways to Affiliate
The Independent Market Observer, Brad McMillan

Follow Us