Conducting an annual portfolio review can be a very powerful client engagement tool. Besides reviewing the progress of various investments in the client’s portfolio, you should take this opportunity to develop a comprehensive understanding of your client needs. Then, use this knowledge to act in ways that strengthen trust and deepen loyalty.
During this review, the advisors and clients can examine the many changes thatoccurred inthe 12-month period – the birth of a child, the death of a loved one, the loss of a job etc.Then readjust the client's financial plan, charting a new course if needed or making necessary changes in the old one according to the new situation. Here are three important questions that you should ask your client.
Q1. How do you feel last year’s strategy helped you to reach closer to your financial goals?
You should kick start your client’s annual review by analyzing portfolio returns generated last year. This helps you to build confidence in the client and also makes him comfortable to discuss in depth this year’s financial goals.
While showing his portfolio return compare his returns with last year’s (or earlier, as the case maybe) portfolio when he was not your client. Discuss in detail how strategies suggested by you helped him to accomplish his goal. And if some investments have not generated returns, suggest ways to improve it.
At this stage, the client would be feeling comfortable and the stage is ready for you to probe a more delicate issue - your client’s investment concerns.
Q2. What are your biggest financial concerns currently?
Financial concerns change as a result of changes in life style, priorities and tax regulations. As a financial advisor you should be well aware about changes in your client’s financial circumstances. Economic conditions would have changed after the last review, and so will the concerns of your clients. Areas where they were comfortable a year back, might now be a worry for them.
Because clients are usually uncomfortable to discuss the financial concerns, break the question into different parts like – do you plan to set aside a corpus for your child’s higher education, do you plan to accumulate funds for buying real-estate in next four years or do you plan to buy a car three years down the line?. Among all these, currently which is of utmost importance?
You should then intelligently analyze his priorities and articulate them clearly.
Q3. What are the three things that you would like me to improve on?
You want to know how you can serve your clients better. You will definitely come across few shortfalls in your service which you might not be aware off. Try to understand from them how well you are doing in the eyes of each client. You may be surprised by what your clients will share with you. This will help you to be more perfect in your service. You can ask them specific questions like:Can you tell me how valuable you find the reporting we provide? Is there enough information? Does it clearly explain how your portfolio performed? Are there ways we could improve the timeliness of our responses/ communication?
The annual financial review is indeed the most important step in financial planning. It's a chance to implement any new plan of action that has been developed due to change in goals. And then last, the annual review gives the opportunity to establish future review meetings.
