Financial Planning
Junk your client questionnaire; consider this approach


Saturday School begins a new series of educational articles on a theme that is critical for distributors and advisors to imbibe and practice: financial planning. Financial planning goes far beyond goal based SIP sales, which has become a popular and welcome mode of retail client engagement. In this series of articles, we will explore financial planning - not from a bookish perspective, but from a practitioner's perspective.

The first set of articles delve into the gospel of financial planners - the universally accepted six stage process that defines what financial planning is all about. In the first piece (Click here), we took a closer look at the first stage of these six stages and examined why it is so important to being on the right note.

In this piece, we examine the 2nd step of the six step process - Gathering client data - and offer you a completely different way to engage with clients during this critical phase. For far too long, we have used templated questionnaires which are designed primarily to help data entry into our financial planning software rather than actually understanding deeper about the client's dreams, aspirations and fears. Here is a suggested way forward, for you to actually gather the data you really need to be an effective planner.


The universally accepted 6 stage process for financial planning is depicted below:

As a financial planner, there is a six step process that all professionals follow. In the last article (Click here), we looked at step one, which was "establish and define relationship with the client." The second step of the process is to "gather client data". This sounds intuitive but it is important to remember that this is one of the key steps - how well you do in this area will give the client some confidence in your abilities. Many clients assess if a financial planner is right for their needs based on how their personal information is collected. Jotting down a few notes or trying to convince them to invest in a plan based on your own perception will not help you win the trust and confidence of your client. So how should you be collecting information?

Qualitative and Quantitative

Some financial planners choose to collect information through discovery tools. These tools allow the planner to collect mostly objective data such as facts, numbers and other information that can be entered into a financial planning software. Discovery tools can be a combination of fact finders, data gathering sheets and client questionnaires. While objective data like salary, cash flow is needed to calculate plans, planners still need subjective data from the clients to assess what would be the best method to reach those goals that the client has.

What is subjective financial data?

Unlike objective financial data which can be easily captured in a form, subjective financial data requires open conversations, listening and probing. Subjective data allows the planner to find out what is important to the client, how life would be different if they met some goals, what are their worries and concerns.

Here are common complaints that clients make which prompts them to consider shopping for another planner:

  1. #1 : The planner only wants to sell a product and was busy pushing their sales talk during the whole appointment

  2. #2 : The planner recommended plans that have zero relevance to my life or my needs

  3. #3 : The planner does not really care about me as a client because they didn't ask any relevant questions and was instead suggesting investment decisions without even finding sufficient information

  4. #4: The planner did not take into account my risk appetite and concerns and the investment portfolio is out of balance and unsuitable for my goals

  5. #5 : I am not sure if this planner is competent because the discussion felt so abrupt

Taking a look at common complaints that clients have underlines the importance of collecting both subjective and objective financial data and the effect it has on client satisfaction. So how do we ensure sufficient subjective data is collected?

4 dimensions of life conversations

Instead of starting your conversation with clients by focusing on products and services that you offer, start the conversation with life as a focus. This not only makes the client feel at ease and that they matter, it will help you to properly assess the values, attitudes and expectations of the client.

The four areas of the life conversation that the planner must cover:

#1 : Life history. The goal is to understand the background of the client and why they think about money the way they do. So, ask questions about who they are today and who they were in the past. How did they get to be where they are now - what is their life story? What is their family tree like and who are the significant players in their lives? How has this impacted their finances and attitudes?

#2 : Life transitions. The goal is to take into account the impact of future events the clients might be expected to face and the impact these events will have on their financial planning needs. These questions cannot only be used to establish a relationship with a client but also while conducting annual reviews with existing clients. So ask about bulk expenses they expect to plan for - is their child getting married? Are they planning to send their abroad for college? How about elderly parents? Are they settled? How is their healthcare expenses being met?

#3 : Life principles. The goal is to discover the client's financial philosophy and their framework for making financial decisions. Ask open-ended questions like what they would do if they won Rs.100,000 in a Diwali mela. Would they travel? Spend on clothes? Go out to a nice restaurant? Invest? Ask questions about why they think money is important and what it allows them to do. An important question that many planners fail to ask is why clients decided to meet with them and what would they like to accomplish out of the appointment.

#4 : Life goals. The goal is integrate the client's dream into their financial life plan. Do they have goals? Some clients may not have a clear picture of what they would like to accomplish or even what is possible for them to. So ask questions about what they have to work with now and in the future. If the client has come with a spouse, ask questions to the spouse as well. Sometimes, the spouse may be silent but they might have very definitive ideas on what they would like for the direction of the family finances.

Financial risk and knowledge

Clients are of various types and it is important to assess the client's level of knowledge and experience with financial matters. Here are some common mistakes that planners make when it comes to ascertaining risk appetite of the clients.

#1 : Not asking them about what concerns them - what are their fears? What do they worry about the most? Are they worried about the childrens' marriage plans? Educational abilities? How they will manage the care of elderly parents? Understanding these concerns is key.

#2 : Not asking how they define risk - As a financial planner, your idea of risk may be vastly different from a client. So it is important to arrive at a definition of risk as spelt out by the client. This will give you a better understanding of their risk appetite. Clients can be usually divided into five categories - conservative, moderately conservative, moderate, moderately aggressive and aggressive. Knowing which category they are in will help you recommend products.

#3 : Not sensitising clients about avoiding and accepting risk - No plan is without pitfalls or danger. Every step in life is not without its risk but we make decisions accepting those risks. That same attitude needs to be translated to client' financial plans. It is important for clients to be aware that some risks are unavoidable and to ensure they are comfortable with the risks they are taking with the plan they choose. This will help clients comfortably tackle volatility or market changes that might affect their investments. This also avoids unhappiness or dissatisfaction among clients that may lead them to consider choosing another financial planner.

Ask and Listen

Remember that financial planning is not just an investment exercise, it is a goal setting strategy. It is important to truly listen to what the client is saying and as well what they are not saying. And for you to understand this, you need to junk that conventional 20 point questionnaire and adopt the 4 dimensional life conversations approach.

Share this article