Questions form a vital part of any successful advice relationship.
For the financial planner, the right questions will provide invaluable insight into what is important to the client, helping to ensure that lifelong goals and objectives are fully explored, and a plan is established to achieve these.
For the client, questions can provide important reassurance that their lifelong financial plan is on track to meet their specific goals and objectives and instil confidence that their financial future remains secure.
Here John Winstanley, Chartered Financial Planner at Clarion Wealth Planning shares some of the questions they frequently ask their clients and some of the questions their clients frequently ask them.
Questions we ask clients
What is the real purpose of your money?
An appropriate and pertinent question to begin with simply because when we are introduced to a new client with significant wealth, first and foremost, we need to know what they want to do with it.
A key part of this is to understand their goals and objectives – something we need to encourage them to think deeply about before being able to fully engage in the financial planning process.
This should include thinking about what they really want to do for themselves in their life, whilst also considering things they may want to do for their children and grandchildren.
We encourage our clients to think about their financial goals and what these might be, offering suggestions such as thinking about the amount they wish to budget for annual holidays; or whether they are hoping to help their children get on the property ladder; or whether there are larger purchases they aspire to, such as a holiday home abroad or perhaps more appropriately given recent covid-related restriction… a campervan!
Underpinning all our questioning is a desire to thoroughly understand what really matters to our clients. To that end, we are also interested in less tangible goals such as their desire to perhaps learn a foreign language or fitness goals they wish to achieve. It is our aim to learn as much as we can about them and this then enables us to formulate short-term objectives over the next 12 months, medium-term objectives over the next 1‐3 years and long-term objectives over the next 10 years plus.
With set objectives and a robust understanding of our clients, we can then hold them to account as the relationship progresses through the years. The strength of our client relationships is often forged at the very beginning of the process, but it is cemented as the years go by.
What does your expenditure look like?
Sometimes a challenging question for clients but it’s important that we get them to take a good look at their current spending and consider how this may change in the future.
A key part of the financial planning process revolves around building a lifelong cashflow forecast for our clients and it is imperative that we are working with accurate information when it comes to how the money will be spent. This will then provide more meaningful information for our clients when we review how their wealth will evolve in the future, enabling them to make better and more informed decisions along the way.
What’s your magic number?
We need to know the income a client needs each year to live the life they desire once they are retired or have exited their business. In both scenarios, this will be generated from the wealth they have accumulated to that point and with the latter, the capital sum realised at the point of exit.
For clients who are working towards a business sale, this can be a crucial part of their lifelong financial plan, giving them confidence that an agreed sale price will be sufficient to enable them to live the lives they desire post-exit. In some cases, it may even result in the client going back to the table, with the realisation of the sum required to secure their financial future.
Have you fully considered your intention to transfer wealth to your children only on death and will this be the best time to help them in life?
The majority of wealth transitions to the next generation on death and it is typical that the inheriting children will likely be in their 50s or 60s themselves at this point.
Leaving money to children at this stage of life generally means it has far less impact on them. At Clarion we encourage our clients to explore the possibility of assisting their children financially sooner, ensuring this has the maximum impact at a time it will be required, whilst also enabling the parents to benefit from seeing how the money is utilised.
With a robust lifelong financial plan in place, we are able to give clients the confidence that lifetime gifts are affordable and won’t impact their future financial security.
Have you written wills and do they continue to reflect your wishes?
It is common for clients’ objectives to involve intergenerational planning and it is always surprising how many of those clients haven’t reviewed their wills for years or worse still, haven’t written them at all.
The cornerstone of sound intergenerational planning is a well-considered will and ensuring this is in place is often the first port of call for new clients, particularly those with significant changes to the dynamics of their wealth following a business sale.
Questions our clients ask us
Markets look vulnerable – should I move my investments to cash?
Our job as financial planners, and with the vast experience we have, is to counsel clients and make sure they don’t succumb to a natural instinct to sell when ‘radar noise’ is telling them to.
For our clients the focus is a lifelong financial plan, ending at age 100 in the majority of cases. Whilst no one has a crystal ball, a set of reasoned and reasonable assumptions, including likely investment returns over the longer term, help to ensure the lifelong financial plan is as accurate as possible.
In addition, we instil confidence by stress testing our clients’ financial plans, demonstrating the likely impact of a market fall and how various iterations of market volatility could impact the success of their financial plan over the longer term.
The advice to our clients is almost always the same, keep your eyes fixed firmly on the horizon, enabling any short-term bumps in the road to be ridden out.
Should we help our children get on the property ladder?
This usually comes with the caveat of not wanting to spoil them, but the answer is almost always that this is a great way to put your hard-earned money to good use.
This should always be done with a carefully considered lifelong financial plan and robust cash flow forecast in place, providing the client with certainty that the proposed gift will not impact their future financial security.
How is my investment performing? Or how has my investment performed over the last 12 months?
This tends to be a question that is typically asked by our newer clients, who are used to their previous financial planners focusing on investment performance in isolation.
At Clarion we focus on developing an in depth understanding of our clients and their goals and objectives in the first instance, which helps to develop their lifelong financial plan. These goals and objectives then become central to client meetings and the most important target for our clients.
Investment performance can then be viewed over the longer term and in the context of specific goals and objective. Bespoke investment advice provides the foundations for our clients to grow their wealth more effectively, underpinning their lifelong financial plans, and ultimately making their goals and objectives more achievable.
How will we meet our income requirements once we retire?
This question is mainly driven by the fact that typically someone who is retiring, ceasing employment, or exiting a business, is used to being remunerated on a monthly basis. In addition, some clients would have historically had a pension which provided a monthly income to support their lifestyle throughout retirement.
Changing pension legislation now means this frequently isn’t the case and clients have increased flexibility in how they can meet income requirements once retired.
At Clarion we consider a client’s total wealth and make annual decisions as to how best meet their income requirements. This will involve maximising tax efficiency by drawing money from a variety of investment vehicles, utilising different tax allowances. This could mean that a client draws income from a pension up to the personal allowance (currently £12,570), alongside withdrawals from unwrapped investments within capital gains tax allowances, or withdrawals from tax advantaged investments such as ISAs and investment bonds, to meet their total income requirement for the year ahead.
In many cases this will involve the client paying little or no tax for a number of years, further preserving their wealth and improving their future financial security.
I want to do ‘X’ ‐ can I afford it?
Working at Clarion and helping clients achieve their goals and objectives is extremely rewarding and it is particularly satisfying to be able to encourage our clients to spend their money, with the foresight that it will not impact their long-term financial security.
It’s also a comfort to our clients that they can come to us for clarity and assurance that a dream purchase is affordable.
A recent example of this is a client who was looking to relocate to be closer to family in London, an exercise that involved the rare act of upsizing in retirement. Having set an initial budget based on the sale price of the current property, it quickly became apparent to the client that the home they desired wouldn’t be affordable. We stress tested the client’s lifelong financial plan to include an increased budget for the planned property purchase, demonstrating that a significant increase wouldn’t jeopardise their long-term financial security. The clients have now secured a fantastic home in London, close to their children and grandchildren.
Clarion Wealth Planning are Chartered Financial Planners, specialising in true, lifelong financial planning and investment management. We develop, implement and monitor bespoke long‐term plans for successful individuals and their families, specialising in business owners intending to exit or capitalise their business. Above all, we give our clients the certainty that they can enjoy life to the full now as well as long into the future because they have clarity and confidence about their future wealth.
