Financial Planning Fact Finding Interview Tutorial
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This Piece is to Help Financial Planners Conduct Discovery Interviews with Prospects and Clients
Discovery is the Process of Discovering:
• Who your client is today, a little about who they were, but mostly who they want to become in the future.
• How they got to be where they are now (their life story).
• Their "family tree" and who the significant players are in their lives.
• The moves they intend to make in the future to reach their goals.
• What they want from life, people, and their money.
• What they want you to do for them, what their expectations are of you, and in what time frames.
• What they have to work with, both now and in the future.
• How and why client and spouse may differ on these matters.
• And last, but not least, how they feel about all of the above.
Discovery in the Financial Planning Business
Discovery tools are also known in our industry as fact finders, data gathering sheets, data collection sheets, and client questionnaires.
These names are typically used to describe financial software tools that collect mostly objective data - facts, numbers, and other information that can be directly input into financial plan software. For the way some people conduct our business, these are adequate to get the job done.
In the way we conduct business, however, there's another important part of the process - subjective, "right brain," or emotive Discovery.
Objective data is needed to create the appropriate input for computer-generated plans (family budgeting, investment management, retirement planning, balance sheet and net worth projections, college funding for children, insurance ledgers, estate planning reports, etc.).
Subjective financial data is needed to find out what the client wants, how they feel about things, what their time frames are, what their fears are, what's important to them, how their life would be different if certain things happened, etc.
Also, without knowing the subjective data, the reports generated by the objective data rarely reflect what the client hired you for. Because of the complexity of our business, just these omissions can set the stage for a short-term relationship filled with arguments.
This is especially bad in our business; where every little complaint is supposed to be documented and sent to the branch manager, who is supposed to send it to the Broker Dealer, who then sends it to Finra, who then puts it on your permanent record that anyone can access over the Internet. This is why so few complaints are actually brought to management's attention, which can result in even bigger troubles in the future.
Some of the most-common client complaints resulting from inadequate Discovery are:
• Making important decisions for people with inadequate and/or insufficient information.
• Developing and recommending plans that don't fit clients' lives.
• Unsuitable investment recommendations brought on by improperly determining their investing risk tolerance.
• Failure to take the client's total investment picture into account when making an asset allocation report (e.g., ignoring the 401(k)s because the planner can't make money from giving advice about it). This most always results in a recommended investment portfolio that is either out of balance or is unsuitable.
• The feeling that the financial planner is just out to sell product because they didn't take the time to get to know them well enough.
• The feeling that the financial adviser doesn't care because they never asked the most important (subjective) questions.
• Perceptions that the financial planner doesn't know what they're doing when details clients think are important are left out of discussions.
The result of these problems is usually a short-term transactional relationship that didn't benefit anyone. This also won't produce quality referral introductions, which you need to grow your business. In order to get referrals, clients must like you, trust you, and respect you as a professional.
Financial Planning Discovery Tools
There are several types of Discovery tools used in the financial services business. The ones you'll use will depend on what the client engages your services for:
• Generic Discovery: For most all generic and lifestyle information; family, employment / career, risk management (insurance), and estate planning Discovery.
• Investment Planning Discovery: For getting most of the suitability information needed to build and manage suitable investment portfolios.
• Cash Flow Discovery: For analyzing where the money comes from, where it's going, and what the differences and trends are.
• Retirement Planning Discovery: For projecting their financial future.
• College Planning Discovery: For projecting how children's college funding needs will affect the overall financial plan.
• Business Discovery: For evaluating and making recommendations on various aspects of their business interests.
Why Conduct Discovery?
Discovery is one the most important parts of your "job." Different advisors perform different functions at different times, so you could find your job being any one of the following:
• Financial advisor, planner, or consultant.
• Investment manager, consultant, or advisor.
• Money manager.
• Insurance consultant or advisor.
• Wealth manager.
• Bank / Credit union representative.
• Retirement specialist.
• Tax advisor or consultant (CPA).
• Estate planner / Attorney.
• Trust / Charitable giving officer.
• CPA / Business tax consultant.
All of the above have things in common, one being the need for good Discovery. In order to do any of these jobs, one has to have enough of the right kind of information to work with (and to input into financial planning software).
It's impossible to drive to a destination when you don't know what or where the destination is. You will also have the same problem if your map is wrong. Then the last commonly-used analogy is - would you follow a doctor's treatment before they even asked what was bothering you?
Of course not, and your clients and prospects won't either.
People need to know that you understand their situation completely before they will follow your recommendations. You can find people who will follow recommendations blindly, but most "A Level" clients won't.
Discovery is where you'll more than likely make your first in-person professional impression. Even if you are new to the business, using these data collecting tools to do good Discovery will make it seem like you're a seasoned veteran.
This is because hardly anyone in the business does good Discovery. Discovery is almost always done, but rarely is it done well because it usually stops when the financial planner realizes they can get easy short-term transactional business.
With good Discovery, you'll win A-Level clients over easier because they probably have been around the block several times with various types of financial advisors over the years. If you're in a tough competitive situation, then performing Discovery well could win the relationship because your competition will probably just be taking random notes on a yellow pad.
Good Discovery alone could win people over just because of the perception that you have tools, and a system in place that will benefit them, when the competition didn't. Some people will place their business with advisors just because they feel they can trust them, and the advisor knows what makes them tick. The details of a technical presentation will fade in a few hours, but the feeling clients have when they think they finally found someone that understands them, will last a lifetime.
Discovery also focuses the attention away from you, and where it should be - on them. People love to talk about themselves, and most loath sales pitches. If you know stockbrokers, you know that most are not listeners because they are too busy spewing what they want you to trade now.
When people think you care, because you actually listened, and you have a system in place that will help them, the battle is mostly won. When the initial battles are won, their business is rewarding from both a financial and personal standpoint, and you will receive many quality introductions over many years. This is the best way to grow a prosperous practice in this business.
Hopefully, one of the reasons you are in this business is to help people realize their purpose, values, visions, and goals. To do this, you must first find out what they are by conducting both good objective and subjective Discovery.
The more subjective questions you ask about how clients think and feel, and what their visions are, the better the rapport you will have with them, the more of an emotional investment they will have made with you, and the more they will trust you.
One of the reasons is that clients will feel like you care about them as people, and not just income-producing "buying-units."
On the subjective side, your goal is to find out what their purpose, values, and goals are. Sometimes, people don't even know themselves because nobody has ever given them permission to think about these things. Some people are too caught up in caring for other people, so busy, or think they are so busy, that they never even stop to think about what they want out of life. Some people are so busy planning and caring for others that they never thought about what their own goals are. To some clients, just stopping them long enough to get them to think about these things is worth the compensation you'll earn from them.
In many cases, people are so busy with their lives, that by forcing them to sit, stop, and think about their life's goals, you're actually helping them discover things about themselves that they didn't even know before. When this happens, you've made a client and a friend for life (that will gladly fess up every referral in their phone's address book).
When a prospect sees the light bulb go off over their heads, sits up straight and acts like they have a new mission in life, and says anything like, "Wow I never knew that about myself before. That's why I'm killing myself working so damn hard, now I get it!" - then they're now a client that's up for anything you suggest, and your hard work is over.
The only way you're going to get to this point, with everyone, is to practice using these discovery tools a million times until you can ask the same boring questions over and over again, like you're their best and only friend that really cares about their future happiness. This isn't hype, try it and you will see, it's only a matter of time, hard work, and practice on your part (assuming that you do care).
To summarize what you want to do when asking the subjective questions, always keep in mind:
• What are the client's purpose, visions, values, and goals? Values can be identified by how they feel about things. Their purpose is what they think the meaning of their life is. Visions mean how they want to see themselves in the future. Goals are what they need and want in the future to make it happen.
• Why do they have these all of these purposes, visions, values, and goals? How did they evolve? Do they frequently change? When and why? Who were their inspiration? What's the core motivation driving it all?
• What difference would it make to their lives if they could someday realize their purpose, visions, values, and goals, spend the time they wanted on their passions, while not having to spend resources on activities they don't like (like working for a living)?
To most people it would make an enormous difference. You want to get them to paint the pictures in their mind of what their life would look like if they did reach their goals. Once they can visualize those visions, then they become interested in knowing what it would take to make it happen. If you can help them do that, then they are very likely to hire your services and become good long-term clients, and give you quality introductions (referrals).
• The next step then is to find out what's preventing them from doing the things they want to do. Most of the time, it's just time and money. Sometimes it's health problems and other people. But sometimes, it's just that nobody told them they could do it now (AKA nobody "gave them permission").
Many of our clients are shocked when we tell them they have enough investment assets to quit work now and live their dreams. They had the resources all along, but nobody told them how to put them to use to make it happen.
Sometimes, it's just the fact that nobody told them it was okay. This is America - there's no law against quitting your job, and then setting up your investment assets to realize adequate investment income to pay for everything; so you are allowed to do that. Some people just think there are magical forces at work that's stopping them, but it's really only in their minds (also, their brains could just be "broken").
What's stopping them could be anything, real or imaginary, so it's your job as a financial adviser to find out. Until you know, you can't do much of anything to help them.
• If things they want to do are not achievable, then you'll need to tell them that, help them paint pictures in their minds that are realistic, and that prove there are really no roadblocks in their way.
The goal is to become a trusted advisor in their eyes. Performing emotive Discovery well is the best way to do that.
Discovering the objective, "below the line" side, is important too. To properly construct a budget, college funding plan, savings plan, investment portfolio, insurance protection strategy, estate, retirement, or financial plan that will best serve your client - you must first "know your client" from the numbers side too.
Not only is it important to do objective Discovery for your own use, but this is the data needed for software inputs by the case design team (this was a term used "back in the good 'old days." Very few financial planners firms can afford those expenses these days).
The better job you do, the easier it is to build the case. This means the less the team will have to come back to you with questions; which will significantly speed up your turn around time (making their financial plans).
You'd gather this financial data not only to construct an appropriate financial plan, but also to collect documentation to back you up from a compliance and/or liability standpoint.
Client suitability is one of the most important buzzwords that you should always keep in mind in this business. Dozens of people are fined and/or expelled from the industry monthly by Finra and/or the SEC, just from placing product that was deemed to be unsuitable for the client.
Discovery, coupled with proven investment management techniques, will virtually eliminate these problems, and many more.
When to Conduct Discovery
Discovery done well takes at least several hours.
Throughout this text, we're assuming that you have qualified your prospects (and/or existing clients) so you won't be spending this much time with people that can't generate enough business to be worth your efforts. There are exceptions of course, but you probably should not do full Discovery with people who do not fit the profile you've created for yourself (unless you just like to practice, they're a "center of influence," or you just want referrals).
Discovery happens from the time you first talk with a prospect because you're starting with little-to-no About them. When you first meet someone, you'll probably discover something new about them every minute.
Usually, your initial conversations will be focused on telling them what you do and finding out if you both will benefit from working together. Once they agree to come see you in person, you'll probably still be in the position of selling yourself and your services until they commit to becoming clients (by signing an advisory contract, or just agreeing to work with you on a commission basis, etc.). Once you have this kind of commitment, then full-blown Discovery can begin.
To reiterate, don't perform Discovery, and/or submit Discovery forms to case writers generating computer reports for you, until you have qualified the prospect and received commitment to do enough business to be worthwhile! Just because you have a commitment and have done good Discovery is no guarantee that they will become clients (or they will do enough business for you to profit).
Not doing either of these at the right time just wastes everyone's time. Sometimes, the investment portfolio manager usually won't even do their thing until the money has transferred into the account.
A lot of financial planners believe that people won't do business with you until you do some work for them first. Experience with dozens of advisors over dozens of years has shown that people that want your recommendations before they will engage your services, just want a freebie and have little intention of becoming a good client.
So if people want to know what kind of reports you will generate for them, show them some sample reports and tell them they will get reports that looks just like that, but customized for their situation. But only after they go through Discovery, and become a paying client.
You should tell prospects (in your initial phone conversations), that the first (of possibly a few) Discovery meetings will take anywhere between one to two hours, both initially, then annually. Try not to go much longer than that because people will get annoyed with you and will lose interest as bladders fill, stomachs empty, and their attention spans diminish. If more than two hours pass and you're still into it, find a stopping point and have them return another day. That's better than having people feel like it's a chore meeting with you.
Another important point is to tell them that their spouse (or whomever they rely on to help with these kinds of decisions - lawyer, father, accountant, friends, etc.) must be present, or you'll have to reschedule the meeting until they can both make it. If one spouse is not with the program, then chances are that they will waste a lot of your time, and will back out when it comes time to implement your plans.
The only exception is if they make it clear that only one spouse needs to be there because the other doesn't have anything to do with these issues.
We've seen every trick in the book when it comes to "weaseling out," and most have to do with other people not being "with the program."
How to Conduct Discovery
Now that you know why, and when to conduct Discovery, let's talk about how to do it. First some important basic information:
• Keep in mind that selling yourself, your firm, and what you do, is over (for the time being). You got commitment to move forward, and this is the point in the program where all of the attention should be on getting them to open up and tell you more than they ever told their mother about this part of their life (some people actually say that during Discovery). You've sold them, so it is not about you anymore.
• Make sure you won't be interrupted during the process. Hold all calls, turn off your cell phone, put your computer into standby mode, etc.
• The meeting room should be quiet, the chairs comfortable, and the temperature cool to moderate (below 70 Degrees), with slight fresh airflow. Above 70°f and they'll be wanting to fall asleep on you, especially if you talk too much. Stale air makes you both "brain dead."
• Offer drinks with caffeine. Coffee is good, but Coke-like drinks are better because of the sugar. Diet drinks are not as good because they have aspartame, which doesn't do much to stimulate people. Sugar is better than fructose, because fructose will give you "restless leg syndrome," which makes it hard to concentrate. Offer refills.
• Candy dishes help too because hungry people will be thinking about leaving.
• Affluent people like tea too, so having a nice tea set with boxes of tea with multiple flavors, and all of the trimmings, is well worth the expense.
• Never interrupt when someone is talking. Your turn to talk starts again when Discovery is over. During Discovery, your role is to listen, take notes, get them to elaborate on important issues; and when they're done with one topic, to segue into the next question. If people ramble on about nothing too long, which they do, then you'll have to interrupt and do something to stay on track.
• Keep good eye contact when you're not taking notes. People are opening up to you by telling you their life story, so do everything you can to appear interested, even if you're bored to tears.
• Take breaks. Empirical studies have shown that people's attention spans start to fade after 15 minutes, and it's a problem after about 45 minutes.
• If you use a tape recorder or video camera, be sure to ask their permission first. If they hesitate at all, tell them you won't use it.
• If you share the meeting room, be sure you have it scheduled for at least half an hour longer than you told them it would take. Even after a two-hour meeting, people still take time to pack up, say goodbye, etc.
• If your meeting room has a window, seat the clients so they will be looking out the window, and not looking into the office where they will be distracted by people walking past.
• Call them the day before the meeting and remind them to bring all of the financial data you requested. Again, make sure both client and spouse will be there by telling them if one doesn't make it, you'll have to reschedule - even if one person is already there with you in the meeting.
• If you use presentation material, sample financial plans, etc. to get your point across about how you do your thing, be sure to bring it (and make sure it's fully stocked with things you usually take out of it). Clients ask questions at random about what you're going to do for them, and it helps to have everything there.
• Ensure there's no TV, radio, music, or people talking that will be a distraction.
• Get some pictures of people doing fun things and put them on the same wall as the window. Some examples are skiing, lying in a hammock on the beach, golfing, and a family with people of all ages on a picnic, etc. When they start talking about how they want to retire and have fun, just point to the pictures. You won't even need to interrupt or say anything because the pictures will say the thousand words for you.
• Have more than one copy of these Discovery tools with you in the meeting in case you need more copies, etc.
Instructions for the (Generic) Client Discovery Questionnaire
First, please notice the cover pages. Other than describing which tool it is, the covers on all of the Discovery tools are the same.
Next, some ask, "Where are all of these emotional questions you said were on the Fact Finder?" The answer is here, on this page. If you have trouble remembering them, them copy and paste them into a document, and print it onto a separate page, then use it during the interview. The key is to always ask this after they make important points, "...and how do you fell about that?" Then shut up and take notes without interrupting.
Using MS Word, put the client and spouse's names under Prepared For. It says John & Mary Sample to remind you to change it before you print it.
Your name goes under Prepared By. It says Smart T. Advisor to remind you to change it. Also, change the company contact and Broker Dealer Information at the bottom of the page to reflect your situation. Update the month and year before printing too.
Next, you'll want to select the printer you'll be printing these documents to. You do this by going to the File menu. Then select Print and select the printer you want to use (probably a color printer). Then click Close in that menu screen. After you've done that, then format the document to print right on that printer. Everyone's printer is different so this could be a non-event, or you could be stuck doing this for hours.
On some of the Discovery forms, the right side of the pages are mostly blank. This area is for you to take notes on. What kind of notes? Mostly how they feel about the topics you're asking them about and other information that you think is pertinent. The left side (left brain - logic, conscious) of the forms are objective, and the right side (right brain - emotive, subconscious) is for subjective data. (Yes, this is the opposite of how the brain works.)
Most of the questions are in the format of client and spouse. The word "client" has more status than "spouse," so sometimes there is some controversy over who gets to be the client and who has to be the spouse. If this ever happens, you can stop the arguing by asking who is the oldest. Tell them the oldest person gets to be client, and the youngest has to be the spouse. If they ask for a reason, tell them because the computer programs you use work better that way (which is true to some extent). If they whine again, then just let them do whatever it takes to make them both happy.
The generic Discovery tool (Fact Finder Part I): It says Client Discovery Questionnaire on the cover. It's used for gathering most all of the clients' generic and lifestyle information. It contains:
• Basic personal information.
• Employment, career, and company paid benefits information.
• What they do with their free time and money - hobbies, charitable giving, board of director activities, etc.
• Their health and other significant factors that may affect their future.
• Significant expected financial inflows or outflows - inheritances, lawsuits, etc.
• About their current advisors.
• Family and significant others.
• Estate and risk management (insurance) information.
• A checklist for gathering needed documents.
• A place where they explicitly tell you in writing what it is they want you to do for them.
Client and Spouse Profile: This is an easy page because there aren't many subjective questions. Let's start at the top and work down.
The first not so obvious question is on the third line down where it wants you to check a box for marital status. If there is only one client, then check one box. Put down how many times they have been married and divorced, if applicable. If their status is anything other than the choices given, write it in under the "Other" option. Some examples of "other" would be mother and daughter, separated, gay, etc.
Regardless, ask them how they feel about their status and write it in the blank area under the check boxes. Some examples of emotive questions would be:
• How do they feel about their marriage at this point in their lives?
• Do they plan to stay together?
• If there is just one client, ask if they plan to get married, when, etc.
The Primary Contact Person question is asking who is assuming the most responsibility for managing this financial relationship. It also tells whom to ask for if you call and a child answers the phone.
The Who Does Most of the Money Management question will help here too. Sometimes just mentioning the finances will turn one on and give the other a migraine. In these situations, you'll know whom to ask for when you call. Regardless, ask them how they feel about this and write it in the blank area under the check boxes.
The citizenship question is needed for filling out various account investment and insurance forms. If someone is not a US citizen, then you may want to ask about it - if they plan on moving back, becoming a citizen someday, when, etc. Put the country they are a citizen of on the blank line. Regardless, ask them how they feel about their status and write it in the blank area under the check boxes.
The Any Plans To Move question is important too. Some people are close to retiring and want to downsize to reduce expenses. Some investors are planning to move across the country soon. This would raise a red flag whether or not they will make good clients. If the answer is "yes," then you'll need to find out why both from objective and subjective view.
Sometimes, the big fancy house is the biggest reason people can't retire and end up on a lifelong workaholic treadmill. And sometimes when you ask people, each one thought the house was important to the other spouse, so they never talked about it. In reality, neither of them may want nor have a need for the big expensive house (especially empty-nesters).
Some investors just need permission to downsize, quit working, and pursue their goals. If you can be the one to show them they can do this, and give them permission, then you'll have good long-term clients that will give you quality introductions when you ask them for referrals.
When asking about their mobile phone numbers, you should ask if it's okay to call them on these phones. Same with the e-mail addresses - only ask for the ones that are okay for you to send things to.
Important point: From a compliance point of view, anything people e-mail to you is considered to be "in writing." Anything that a client e-mails to you that could be viewed as a "complaint" has to be kept in your complaint file. We've seen situations where best friends (client and planner) are talking about the account. Some of it had to do with their investments, so it fell into this area - which had to be reported to everyone. You may want to consider minimizing e-mailing as much as possible to make it harder for people to give you things in writing. In this real life example above, the planner just stopped giving out his e-mail address after his BD auditor found some things they felt were "complaints."
Last on this page, Preferred Mailing Address. If the client wants all of their mailing from this relationship to go to a different address than their home, then make a good note of it and be sure to keep it in mind when you're filling out all of their paperwork. You may want to ask why, because sometimes it raises red flags when one spouse is trying to hide things from the other.
Client and Spouse Employment Information Page: These pages have a lot of objective questions, but the emphasis should be on the subjective. How they feel and what their future plans are with their career at their current firm are very important. People change jobs frequently these days, so the objective data can change quickly, but the subjective usually stays the same much longer.
The difference between the questions, Job Title and Job Description can be very important. For example, if you ask someone what their job title is, and they say, "Doctor," that means this person may be an A-Level client. Then when you get to the job description, and they say, chiropractor or optometrist, then that could change them to a C-Level client.
The business / industry, and how long the client / employer has been in it, also makes a difference. If someone just recently made a career change, their income could be depressed for years. If the business just changed its way of doing business, then this could mean troubles ahead. How long the client has been with the employer is a little less important.
The next four items (Phone to Address) should be prefaced with, "Is it okay if I call, fax, or send mail to you at work?" If they say not to contact them at work, then this information is not needed, and may just annoy them, so skip it.
The remaining questions, until you get to the benefits section, are mostly all subjective. You should ask some emotive questions here, such as:
• Can they fulfill their long-term career goals with the current employer?
• What's going on in this position that they have now?
• How do they feel about their coworkers, supervisor, the industry, the firm in general, etc.?
• How do they feel about their skills, experience, education, and competence relative to their current position?
• How do they feel about the advancement in their career (or trade that they're in) relative to what's going on in that industry? Are they keeping up or falling behind? Are they able to get the education required to progress in this field?
• Do they like working for this employer? Is this a good company? Is it making good or bad moves that will have significant impact on both theirs and the company's future?
• How long do they intend to work for this company and why? What's next and when?
• If they want to make a change, is the reason for it real? Is it logical or emotional? What does the position with another company have that the current company doesn't? What would be different about their life if you made that change (both on and off the job)?
• How do their spouse and family regard their employment?
• How do they think their employer feels about them? Is there mutual respect?
• How are they participating in the company's benefit programs? How, why, and which ones? Their 401(k) is one of the most important ones to ask about.
• What are they doing to stay current in their job, further their career, get a promotion, or move to a different career? One of the things you're trying to find out is if they plan to return to college, switch careers, etc.
• How secure do they feel? What are the risks of layoff, termination, downsizing, takeover, outsourcing, restructuring, Golden Handshake, etc.?
How probable is it? How does that make them feel? What's going on in their life because of that? What steps are they taking to prepare for this? Are they in denial? Do they have a plan? Would it be important to them do something about the fear of unwanted change?
Personal Profile Pages: This page gets more of their personal information.
On the Personal Hobbies section, list everything they do when you ask, "What do you do for fun and to relax and enjoy yourself?" Next, ask how they feel about that, if they're spending enough time doing it, if they plan to or what to do more or less of it, if they ever got hurt doing it, etc.
Are these things personal activities or do they include others, like family and/or friends? Do they do all of they want to do? Are there any interests that they would like to pursue that they currently dont? Why? What would it take? What's preventing them from doing the things they want to do? What are they doing to prepare for things that they want to do, or that they want to do more of? The point is to try to get them to describe what the difference in their life would be like if they could do everything they wanted to do. If it wouldn't make a big difference in their life, then it's not important and you should move on. You want to expand only on things that are important to them. This section is also about determining how dangerous having their fun is. People die and become disabled from their hobbies on a daily basis. Plus, it may make them not qualify for life insurance.
The Charitable Organizations section serves several purposes. First, you want to find out if they donate to charity. If so, ask how much. Next, ask if they actually spend time with charities. If so, ask how much, and why. When it comes time to ask where they want their investments to go when they pass away, their answers here could resurface. Ask how they feel about charities in general, and why. Ask, "If money was not an issue, are there charities or causes that you'd like to support? Which ones, and why?"
If they're on a board of directors, or act as a trustee, ask why they do it, and how they feel about it.
The Medical Problem section is self-explanatory. You may need to know if they smoke and/or how much alcohol they consume, for insurance applications. In general, medical problems can impact financial planning decisions, so it's important to know all you can about issues that may shorten life expectancy, put limitations on activities, affect their ability to earn income, affect their ability to make decisions, affect their approval on buying insurance products, etc. As usual, ask how they feel about it and why.
The Inheritance section is for listing what they feel they will get when someone passes away in the future. Since nobody knows for sure, when it is expected to occur is not asked. Some people also think they will receive something when they are not listed in the benefactor's will. If they are not sure, check "?" and tell them not to get their hopes up. As usual, ask how they feel about it and why.
The Lawsuit section is important because of the potential financial impact. If it's important and there's not enough room, use another page to write notes on.
The Advisors section has mostly objective questions, but this is an important section to get them to elaborate on. For example, if they throw a fit about how their investment manager lost them a small amount of money when the market was down, then this is a red flag that may tell you not to sign them up.
It's also good to know how long they have been with each of these advisors, and how many of each type they have had in the past five years. If they are in the habit of changing advisors often, then this also could be a sign that they may not be good clients.
A major concern in the process is "who the players are" in making financial decisions. If after you do hours of work, they tell you they have to run this by their attorney, accountant, the stockbroker brother-in-law, etc., then you have a major problem. Be aware that this is one of the biggest stumbling blocks in the business. You should learn who these key people are as soon as possible and consider not moving forward unless ALL of these people are with the program (by inviting them to the meetings, phone calls, etc.). Many hours of wasted time can be avoided by flushing out people who just want to stop the show for whatever reason. We've seen every trick in the book when it comes to "weaseling out;" and most have to do with other people, which may not even really exist, not being "with your program."
Significant Others Profile Pages: These pages are for getting to know everyone that's important to them. The first page has a place to list four children. You can always print or copy another page if there are more than four.
Name, date of birth, and gender is self-explanatory. The section below asks about the relationship specifically:
• Natural to: Client and/or spouse are the natural mother and father. If both, write both.
• Stepchild to: If the child is natural to either the client or spouse, but not both, and client and spouse are married, then the child is step to one of them. Just put who the stepparent is on the line.
• Other: If the child is not one of the two options, nor adopted, then write about the situation here.
As usual, you'll be taking a lot of subjective notes on the right-hand column when it comes to other people.
The next section, Dependent on _____ for financial support asks if the client or spouse is financially supporting the child. If they are currently, and plan to stop once the child graduates college, then write in the year (or age) the child intends to graduate. You would use the Starting when line if they are not supporting them now, but intend to in the future. If the spouse is the only one that is giving money to the child, then check the Spouse box.
Summarize any significant health problems on the last line and go into detail on the comments section.
The very last section on this page asks whether the lady of the family is currently pregnant, wants to be, plans to be, how many more times, and when. As usual, you'll want to take a lot of subjective notes because of the huge financial impact children have.
The next page is for listing everyone that is significant to them that are not children. The relationship section is simplified for one-word answers (father, friend, etc.). You should expound on the relationship on the right-hand section.
The last section is for describing their relationship with pets. Yes, everyone thinks this is a corny section, but some people feel as strongly about their pets as they do about their family. Some people even put large sums of money in their will to care for pets after they pass away.
Always keep in mind that it is not your role to be judgmental about any of their answers. Their answers are neither right nor wrong (and definitely not funny!). Just write the information down so you can understand them well enough to have a good long-term financial advisory relationship.
Estate Transfer Pages: There is one of these pages for client and spouse. Both are identical.
Enter each estate transfer vehicle in a separate row. If there are more transfer vehicles that there is room for, print another page.
The first row already has the type of estate transfer vehicle written in it. That's because the first and most important vehicle is the will.
The first box on the top left is for describing what type of estate transfer vehicle it is. To the right, write down when it was last reviewed. If it was never reviewed after it was drafted, write in when it was first drafted.
The beneficiaries of the trust are people or organizations that currently, or will be expecting to, benefit from the estate transfer vehicle. List all entities with the percent of their benefit, and when they will receive it.
If there is a special investment in their will, or in a trust, that will pass to someone, then list it in the special bequeaths box.
The executor is the person who will execute the document when the person passes away. It can be important to find out who this is, why, and how they made that decision. Guardians set up in advance are also very important.
The bottom sections ask other types of estate planning questions. If they have already used up some of their Unified Credit, write how much was used, and why.
Medical Power of Attorney gives someone else the power to make health care decisions in the event of incapacitation. This, and the Durable Power of Attorney, should be part of most everyone's will.
The Insurance Page (AKA risk management): This page is for collecting data on most all types of insurance policies. Life insurance cash values and subaccount data go on the Asset Fact Finder.
List the name of the insurance company, the policy number, and the name of the policy on the first block on the left. The name of the policy is whatever they know it by (Key Person, ILIT, work term insurance, etc.).
Put what kind of policy it is in the next block.
The next four blocks are about who the players are. When the insured passes away, the insurance company will pay the face value of the death benefits to the beneficiaries. The insured is usually also the owner, and the person who pays the pays the premiums, but this could be different in various business arrangements (like Key Person where the company may be the owner and pay the premiums).
If it looks like an unusual arrangement, find out why and how it got to be like that. Also, you could be a hero if you find and fix errors, and in general, point out the changes in estate tax laws since the new century started.
List all of the beneficiaries including the proceeds they will receive (in percentages if it's set up that way).
If there are any loans against the life policy, then these amounts will reduce the face value of the death benefit when the insured passes away. Write in the amounts, and circle "N" if they don't intend to pay them back. If they do intend to pay them back, then circle "Y" and write in an estimate of when.
Some policies pay dividends to the policyholder. There are usually a number of options when this happens. They can be taken as cash, reinvested back into the cash value, used to buy more face value, etc. Write in about how much they think they will get, and what they plan to do with them.
Statement of Expectations Page: This page is to get them to tell you exactly what it is that they want, and expect, you do to for them. You can either give it to them to fill out or write in their answers. There is a sample list above to get started. Keep in mind that an effort should be made to list things in order of importance to them (not how profitable they are to you).
Checklist Page: This page is for letting them know that some information or documents were missing when you were meeting with them doing Discovery.
Put a checkmark in all of the boxes on the left if the information was needed and they didn't bring it. You can also put checkmarks in the boxes at the right to indicate items that were already covered. If there are items that you checked on the left, make a copy (or tear the page off) and give it to them as a reminder. The purpose is to remind people to bring everything you'll need next time in order to build accurate financial plans.
You can also print just this page and mail it to them before the first meeting. You should always send an appointment confirmation letter to people when it's your first meeting. The time and date should be mentioned, along with detailed directions on how to find your office. Use the Internet (but be careful, as their maps are just "wrong" more than half of the time) to print detailed maps. Mention what your parking situation is too. You don't want people arriving in your office late and annoyed because they got lost by following your bad directions and/or couldn't park easily and for free.
For Both Advisors and DIY Investors
If you're an investing consumer doing this for your own money, then you can skip the second page, and go right to the third page, where the multiple-choice questions are. Some people like to complete the questions on page two as it helps them focus, but it's not needed to calculate risk tolerance (which is the only reason you're doing this).
There is a spreadsheet included to make the calculations semi-automatic.
Score it for each person individually, then again using an average for jointly held accounts. This is so each person can manage their own individual accounts in accordance to their own risk tolerance, but joint accounts should be a compromise.
If there are two or more people doing this for a joint account, then first give everyone a separate copy.
Then average the score numbers and input the average into the scoring matrix.
Using multiple-choice question #1 as an example, if husband selects A and wife selects, C, then the average is B. If husband selects B and wife selects C, then someone will have to compromise. Whoever has the strongest belief in the matter should win. In other words, if one person feels strongly about answer B, and the other doesn't care too much if it's B or C, then choose B. The answer to one question, or a few, will rarely change the bottom line, so a fuss is not needed.
Read each question and then select the answer that best fits how you feel both now, and over the next year.
Go to the page titled Risk Tolerance Calculator. For each question, circle one of the four answers in the second column.
Then take the number (1 - 4) next to the letter answer, then multiply the number by the Question Weight in the third column. For example, if your answer to question #1 is B, then the number next to B is 2. The question weight is 4. Write down the number 8 in the far right column. Repeat for all questions.
Add up all of the numbers in the far right column for all questions. This is your Grand Total Score.
Find the Risk Category your Grand Total Score fits into using the five categories below. For example, if it's 142, then your Risk Category is Moderately Conservative, because all Grand Total Scores between 121 and 170 are Moderately Conservative.
The last page can also be skipped, as like page two, it's more for advisers getting data from investors, and is not used in managing your own money or scoring your own risk tolerance.
For Financial Professionals
First, edit and format the front page to fit your business. Edit the date, and type in the client's name where it says, "name."
Get the clients to complete as much as they can or will.
Page two gives you lots of information regarding their goals. When you're making the financial plan, you'll want to pay attention to the differences between spouses' answers here. One thing that may be unimportant to one may be critical for another.
Pay attention to the best and worst investments they've ever made. This is so you don't repeat their mistakes, or appear to. Also when a portfolio management choice comes up, you may be able to use their best investment ever made as a guide as to what would make them happy.
The rest of the answers on this page are self-explanatory and are useful in tailoring the portfolio to their lives. These are all very important, so pay attention to them as you build their financial plan and investment portfolio.
The middle section's directions are above in the DIY investor section.
The last page, again is important, and should be looked at periodically as you build their plans. This is basically them telling you what they are hiring you for.
If any of their answers raise flags or are not clear, it's important to clarify them all before building the plan, or you'll either create an investment plan that will not make them happy, or they'll call you on it, then you'll have to do a lot of work over again.
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