You never get a second chance to make a first impression. For a financial advisor, the conversations during the first meeting set the table for the rest of the relationship. In this article, we’ll discuss some of the most essential questions should ask prospects to help set the right tone for the relationship.
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Starting the Conversation
Let’s start with the proper approach. New clients typically begin the conversation with questions of their own. Answering those in a conversational manner will provide openings for the advisor to probe. It’s important to time this correctly. Don’t try to force it.
You might think of the initial client meeting as a first date. The advisor and client want to get a feel for each other, yet they are not necessarily ready for a commitment. It’s all about building a foundation and finding common ground. Asking your prospects the following questions can help with that:
Question #1: What financial concerns do you have?
There are many ways to phrase this question. It’s basically the “how can I help you today” interrogative. By using a motive qualifier such as “what concerns,” you will get a more detailed and useful answer. Knowing what their financial concerns are will make you a more effective advisor.
Another incentive to use this question is its impact as a conversation starter. After exchanging pleasantries and a few minutes of small talk, this inquiry helps you get down to business. It’s never considered invasive because the client expects it—so lead with it.
Question #2: Are you planning, or have you experienced any major life changes?
This is the marriage, children, buy a house query. You should know enough about their present situation to ask this, provided you allowed the conversation to flow naturally after the first question. You may even know part of the answer. Probe deeper here to learn more.
Don’t make the mistake of introducing risk here. That comes later. The early parts of a new client interview should be about the advisor getting to know the client. Discussions about risk almost always involve assumptions. You’re not ready to make any of those just yet.
Question #3: How do you make investment and financial decisions now?
This may have already been revealed to you, but it can be helpful to clarify anyway. Hiring a financial advisor is typically a reaction to flaws in the client’s current financial planning system. Something isn’t working properly for them. That’s why they called you.
It’s important to be empathetic when you field the answer to this question. Let them know they are not alone, no matter how outrageous their prior actions may have been. The objective is to build a long-term relationship. The client will want to know you’re in their corner.
Question #4: Do you consider yourself an optimist or a pessimist?
Your fourth inquiry is actually more of an interjection into the conversation you started with question #3. A client’s outlook on life in general can provide some insight into their tolerance for risk. Find out if they expect improvements in the future or if they are convinced things will get worse.
The answer doesn’t necessarily change your investment strategy with this client, but it can help you phrase the way you describe it. Negative people want to hear about protecting their assets. Positive prospects tend to be more aggressive and willing to ride out market volatility.
Question #5: Have you worked with a financial advisor before?
Some advisors like to talk about downside volatility and risk tolerance here. Before doing that, however, find out if the client has worked with an advisor before. If so, and most importantly, ask why they terminated that relationship. You don’t want to make the same mistakes their previous advisor did.
If the client’s reason is market related, you have a steep hill to climb. Probe deeper to get details on the exact situation and numbers involved before moving on.
Question #6: Are you willing to look at investing as a long-term plan?
Clients are not financial professionals. They may see short-term losses and immediately start to worry about the future. This is the point in the conversation where you can start talking about historical market returns and long-term outlooks. Switch from interview to teaching mode.
These questions are in order for a reason. Psychologically, you’ll want to allow the client to do most of the talking before you broach the subject of investment strategy. You know they are looking for help if they agreed to a meeting, so let them vent a bit before offering a solution.
Question #7: How much short-term loss can you absorb without losing sleep?
You can calculate risk by standard deviation or volatility, but human beings tend to do questionable things when gripped by fear. Set some parameters here and offer to revisit them later on so the client feels comfortable with your investment strategy.
Use anecdotes and past client experiences here to lighten the mood. This is a highly emotional topic for most clients, so ease off from the instructional mode you’ve been in for the past few minutes and tap into their feelings. Understand those and there’s a deal on the table for you.
Grow Your Client Base
We hope this list of questions financial advisors should ask prospects has been helpful. If you can nail the initial meeting, you will be more likely to build a long-term client relationship. For more advice on how to grow your practice, consider working with an experienced financial advisor coach from Northstar Leadership Solutions. Contact us today to schedule a free consultation.