Nurture Client Trust With a Financial Policy Statement

As a Financial Advisor, process governs almost everything we do.

After meeting a new client and exchanging the typical introductory small talk about sports, children, or current events, we would start to discuss why they came to see me. Sometimes I had called them first and they wanted to gauge my value, but more often they had come to me for specific help or guidance. Regardless of how they ended up in my office, I always asked the same initial questions to understand their current situation and what they wanted to accomplish. Of all the questions, one was the 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:

“Do you, Mr. or Ms. Client, have any idea of what you actually need?”

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:

“What specifically are you looking to accomplish?”

Goal: 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?

You can see how specifics are critical to defining and shaping your approach because if you haven’t thought about these things yet, and only start thinking about them in your golf coach’s (or financial advisor’s) 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 they had a hand in creating, they will feel more comfortable staying the course. As their advisor, your job will be easier when the road 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. If you want to understand how to conduct this conversation or use my detailed framework for building a Financial Policy Statement, please reach out via our Contact page.

1. Identify and quantify goals

2. Document current investment and assets

2. Define a detailed investment strategy

4. Create a monitoring plan

5. Written explanation of your strategy to a third party

Could your clients walk away with this playbook and never call you again? It’s possible, but many clients I have worked with 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.