It is a sad truth that a large proportion of clients who are first introduced to a financial planner do so off the back of one or more transactional needs, for example approaching imminent retirement or the recent receipt of a lump sum inheritance.
Not many people seek out financial planners prior to the point of an immediate need. This is very much akin to the healthcare industry where the majority of work is done to cure patients of their medical woes rather than in preventative medicine. Increasing the awareness of financial planning, or preventative financial treatment, I believe is an issue the industry needs to address. It will take time, but the work of the likes of the Institute of Financial Planning can only help.
In my experience, ready-made financial planning clients only tend to arrive at the door of a planner when they are referred directly by either an existing financial planning client or a particularly well engaged professional connection. This begs the question of how a financial adviser can introduce their planning services to what initially appears to be a prospect with just an immediate transactional need.
This takes some skill and experience to resolve, but ultimately is a matter of trust between the client and the planner. Only when a sufficiently high level of trust is established between them can the conversation move away from the client’s perceived transactional need to a wider financial planning discussion.
One key decision the planner must make is to decide whether one or more of the client’s transactional needs should be dealt with at the outset. Ignoring such a need can cause confusion with clients, but planners are often wary of undertaking transactional work that may not otherwise be in the client’s long-term plan.
This is a judgement call on a case-by-case basis, but in my experience a lot of clients originally come with a specific need – such as investment of a small inheritance, accessing pension benefits or repayment of unsecured debt. I would deal with this immediate issue at the time before broadening the subject to look at the client’s wider planning needs. Crucially, this wider conversation would not usually be possible at the outset, as the client is either not in an emotional position to look at planning, or his financial position is such that he does not want to pay the initial planning service fees.
When moving the conversation on to financial planning, it is vital that this is done within the context of a discussion of the client’s wider objectives for the future. Effective planning cannot really take place until he or she can see past a single need or policy to look at the wider picture.
‘Power questions’ can really help develop these conversations. Many tried and tested power questions are available, my favourite being the R-factor question, developed by Strategic Coach. The question is usually phrased: “If we were sitting here three years from today, looking back over that period, what has to have happened during that time for you to feel happy with your progress?”