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For Financial Advisers: Effective Client Discovery

PIMCO’s John Nersesian explains how clients want to work with advisers who have the ability to go beyond the traditional facts and figures.

By John Nersesian

As financial advisers, we’re all familiar with the concept of “know your customer.” The guidance is intended to encourage a full understanding of our clients’ financial situation -- age, income, net worth, tax bracket, etc. -- to ensure appropriate financial advice. In serving affluent clients, however, an awareness of investor financial data may not be enough to attract and properly serve these clients.

Clients want to work with advisers who have the ability to go beyond the traditional facts and figures. They want to work with advisers who truly understand them, their passions, their concerns and their most important goals. They want to work with professionals who understand the intended purpose of their wealth, and who will provide customized advice to realize it.

Here’s an interesting exercise to check your progress on this front.

First, identify your top 10 clients by name, their annual income, and their account balances. Most advisers can complete these steps pretty easily, of course, as they tend to focus much of their energy and attention in serving their most important (and profitable) clients.

Next comes the greater challenge: try to identify their biggest concerns at this moment --essentially what keeps them awake at night -- and finally, their most important goals that they want you to help them accomplish.

Many advisers find that while they know their clients financially, they don’t have a full appreciation for their personal concerns and wishes. An effort to understand clients at this level provides advisers the chance to demonstrate empathy, an important quality to investors, in addition to the competency required to provide useful financial advice. These advisers are often better positioned to develop satisfying long-term client relationships predicated on increased trust.

Benefits of a Thorough Discovery Process

Spending the time and effort to engage clients in an effective discovery process can produce a number of significant benefits for advisers, including:

  • The opportunity to capture the required financial information that allows advisers to provide tailored, relevant advice.
  • The ability to identify key financial issues around asset allocation, risk exposures, capital needs, tax reduction opportunities and other areas of enhancement.
  • A chance to develop an understanding of clients beyond their financial holdings by identifying their values, concerns and passions, leading to greater client satisfaction.
  • The ability to differentiate your practice and establish credibility by demonstrating a professional and thorough process
  • A marked increase in client satisfaction, leading to larger client relationships, lower levels of client attrition, and reduced potential legal risks.

Successful Client Interviews

While advisers often employ their own approach and style that is personally comfortable, there are some common best practices employed by successful advisers in an effective client interview:

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  • Be prepared by confirming the date and time, providing driving directions and parking information, reserving and preparing the intended meeting space (including refreshments)
  • Be organized by knowing what you’d like to accomplish, the information you’d like to obtain, and preparing any forms or paperwork that may be required.
  • Create an agenda in advance to help facilitate the discussion, and provide it in advance for client approval or input. After all, the concerns and priorities of our clients are the most critical to address.
  • Conduct these meetings in person, when appropriate. This provides an opportunity to recognize facial expressions and body language that can be as helpful as the actual information shared verbally.
  • Ask open-ended questions to help facilitate a meaningful dialogue that provides greater insights. Try to re-frame “yes or no” questions accordingly.
  • Engage both parties, despite their different levels of involvement or financial background. Acknowledging the feelings of all affected parties is both professional and respectful.
  • Practice good listening by facilitating a discussion, not dominating it. Clients want the chance to be heard -- giving them that chance will produce positive experiences.
  • End the meeting by setting expectations of what will be done, by whom, when and how.
  • Provide prompt follow-up after the meeting by creating a written summary of what was done and a prioritization of next steps.

Sample Questions for Maximum Impact

Engaging clients in an effective discovery process doesn’t always come naturally -- it requires intent and practice to make it a regular component of our approach. After all, most advisers are anxious to demonstrate their knowledge by delivering advice or making statements. Using effective questions can help to frame a productive conversation around key issues, increase your credibility, and encourage clients to share and actively participate in the planning process.

Below are some sample questions, based on various client profiles, that may be instructive.

General Investors

Of course, the discovery process should address an investor’s past investment experiences, emotional orientation and future investment and service expectations.

  • Tell me about your past investment experiences. What has worked well, and what has not?
  • How would you describe your approach to managing your investments?
  • What are the most common sources of information or guidance that you have relied upon?
  • What are the most important goals that I can help you achieve? What is your timeframe for meeting your goals?
  • What does risk mean to you? How do you measure it and what steps do you take to manage it?
  • What are your greatest concerns?
  • If we chose to work together, how would you define success? What services are of greatest interest to you?
  • Tell me about the relationship you had with your previous financial adviser? What did they do well, and where did they fall short?
  • Tell me about your greatest investment success and your most unfortunate investment? What did you learn from these experiences?

Corporate Executives

Many corporate executives hold significant allocations to company equity exposure, acquired through restricted stock, employee stock option and other awards. While these individuals are highly accomplished in their respective fields, they often lack a full understanding of these plan awards, and are also subject to a variety of behavioral biases.

  • Tell me about your career path and where you think it might be heading.
  • How has your company stock performed, and what are your expectations going forward?
  • How much exposure to company stock do you currently have, and what do you feel is appropriate?
  • What are your goals or concerns regarding the wealth you have accumulated in your company benefit plans?
  • What is your primary objective for these assets (tax minimization, appreciation, risk reduction)? Describe your strategy for managing these assets.
  • If you didn’t work at your current company, how much of the stock would you own in your portfolio?
  • What would be more disturbing: selling a security that continues to rise, or holding one that continues to fall?
  • If you were building a portfolio from scratch, how much would you intentionally allocate to your company shares?

Closely Held Business Owners

Typically, many business owners hold a large portion of their net worth in their closely held business, and a general conversation around traditional investments may not generate the interest desired. Instead, advisers might consider discussing issues that are unique to the business owner including valuation, succession planning, family involvement and asset protection.

  • Tell me about your business.
  • What are the most important challenges that I can help you address?
  • What do you think your business is worth? How did you arrive at this figure?
  • What strategies have you considered or created to exit from your ownership of the business? How do you see your family being involved?
  • What do you plan to do when you exit your business?

The client discovery phase is often the first interaction for an adviser to connect with clients professionally and personally. If conducted effectively, it can help advisers demonstrate their professionalism today and set expectations for the future. Improving your client discovery skills can provide meaningful benefit to your clients and your practice. Feel free to contact me at to learn more.

About the author: John Nersesian, CFP, CIMA, CPWA, is the Head of Advisor Education at PIMCO, where he provides practice management and wealth planning guidance to financial advisers. He previously served as First Vice President at Merrill Lynch, and as Managing Director at Nuveen. He is a faculty member for the Investments and Wealth Institute (IWI) CIMA and CPWA certifications held at Yale University and the University of Chicago.