Nurture Client Trust With a Financial Policy Statement 

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As a financial advisor, you are only as valuable as your process allows you to be.  Offering your clients a disciplined and process-driven approach to their finances will give them the tools to succeed on their own, but make it more likely they won't want to do it without you. 

A typical new client interaction may often go something like this: After initial introductions and exchanging the typical friendly small talk about sports, children, or current events, the real discussion about goals and financial concerns would begin. More often than not, clients aren’t showing up to a meeting just to kick the tires on a potential advisor.  They wouldn’t be there if they didn’t have legitimate reasons to be considering professional advice which means there are unmet needs, concerns, or future goals that they need help accomplishing.

The best advisors have a consistent new client interview process to understand fit and value.  In my time as an advisor, I always asked the same initial questions to understand their current situation and what they wanted to achieve.  Of all the questions, one was most important: 

“What specifically are you looking to accomplish?”

This question often set the tone for the meeting and gave me a lot of insight into the type of individual and investor I had in my office.  More often than not, I had to repeat the question or rephrase it to get at what I really wanted to know which was ultimately "Do you, Mr. or Ms. Client, have any idea of what you actually want?”

The reason this was so important is that specifics matter.  If you want to accomplish something you have to define it, understand it, investigate it, and pick it apart to its deepest level.  If you don’t know what you want, you will never get it. In my role as an advisor, I didn’t need clients waffling on their goals, only to end up frustrating us both in the end.  

Let's use golf as an example: 

Coach: “What specifically are you looking to accomplish?”

Player: “I want to drive the ball better.” 

Ok…but what does that actually mean? Do you mean further? Or straighter?  Or more consistently? Do you want to be better with your Driver only? Or anytime you hit from the tee?  

Obviously, most people want all of the above, but those are still multiple goals that most likely require numerous separate strategies to achieve each of them effectively.  So if that's the case, which is your biggest priority and why?  

If we step back even further, a good coach, after careful evaluation, may be able to decide whether driving the ball better is really the right goal at all.  If that is simply the player’s ego hoping for an impressive tee shot, it might not actually make them a better golfer in the same way being a better putter might.  

You can see how specifics are critical to defining and shaping your approach to client work because if you haven’t thought about these things yet, and only start thinking about them as a client is sitting down in your office, you may not get very far with your meeting.  

Establish Guiding Principles

For those clients that worked with me, we would mutually define a policy statement that would outline the rules and objectives for specific accounts and situations.  Very few advisors take the time to help their clients hammer out an overarching Financial Policy Statement, a document that outlines a client’s goals, philosophy, and strategy for not only their investments but their broader financial ecosystem.  Often this led to a deeper and more complicated conversation about what their money meant to them and how they thought about a long-term legacy.  Not once did a client tell me it was a waste of time. 

Considering your own book of business, how many of your clients could outline exactly how they want to handle different market situations?  How about changes to their incomes?  Have they defined a rules-based approach to their finances?  

If not, you should be the one to help them do it. When clients can refer to a document that they had a hand in creating, they will feel more comfortable staying the course.  A client’s own words are your most powerful tool for directing their financial strategy.  As their advisor, your job will be easier when the path gets rocky because you’ve already prepared for those situations.  

Below is a high-level summary of what I consider the five main sections of a Financial Policy Statement.  Establishing this with a client makes the annual review faster and easier.  The logic of the policy statement is equal parts establishing a point-in-time historical record and fleshing out a clear go-forward plan for advisor and client.  When the historical record of a client’s goals, mindset, investments, and methodologies are clear, there will be no doubts about specific successes or failures within the plan.  

1. Identify and Quantify Goals

This is a point in time view of a client’s priorities. It may change, and when it does it will be easier to reset investment or plan expectations in light of the changing circumstances. 

2. Document Current Investments and Assets

Outline what is owned today, and in what quantities and location.

3. Define a detailed investment strategy

This is the core of the policy statement and may take the most time to create.  As an advisor who is managing assets with discretion, you should be laying out the strategy.  For a client who is managing some or all of the assets, they should be able to articulate how and why they are investing the way they do. 

4. Create a monitoring plan

Establish clear targets for how and when will monitoring, rebalancing, and reallocation be achieved.

5. Provide a written explanation of your strategy to a third-party 

Create a written record of the strategy that could be explained simply and easily to someone unfamiliar with your client’s situation. 

For any client that isn’t confident in their strategy or cannot articulate one through a full market cycle, this will be a difficult exercise. As an advisor, this is an opportunity to demonstrate your value and provide the services clients need to close the gaps in their plan.  

Could your clients walk away with this playbook and never call you again?  It’s possible, but clients realize how valuable this process can be and don’t want to walk away from an advisor who can give them the tools to succeed.  

If you want to understand how to conduct this conversation or use our detailed frameworks for building a Financial Policy Statement, please reach out via our Contact page to schedule a consultation.