An important skill that an advisor should have is the ability to communicate effectively with their clients. Being able to listen is really the key to understanding the unique needs and situation of each client. It is important for clients to share information with their advisor.
Before opening a new account an advisor is required to obtain some basic information, such as an understanding of your risk tolerance and investment objectives. The regulatory requirement for information gathering should be treated as the minimum amount an advisor needs to assist you.
Two written documents can really help an advisor – a family tree and a net worth statement. A family tree can be prepared on a piece of paper by listing the names of people important to you along with their relationship. As an example, your family tree could list the following relationships: parents (deceased and alive), spouse (including any previous marriages), children, grandchildren, siblings, powers of attorney, executor, etc. Birthdates are also useful on the family tree. This information will help your advisor obtain a quicker understanding of your family situation. The second useful document is called a net worth statement. This can be done by summarizing your total assets (financial and non-financial) and total debts. The net-worth statement will give your advisor an immediate snapshot of where you sit today. Both the family tree and net worth statement will help your advisor in asking the right questions to assist you with your customized plan.
Life events such as marriage, birth of a child, arrival of a new grandchild, new employment, retirement, death of a family member, divorce, etc., are times when you should be communicating with your advisor. Updating your advisor on life events will allow them to communicate important information that may be of help to you during these times. This information can be applied when adjusting your investments and plan.
An important reason why you initially went to see an advisor was to obtain assistance with investments. The advisor’s approach to investing and the types of products that they are licensed to sell often drives both the volume and timing of communication. Maturity dates of investments such as bonds and Guaranteed Investment Certificates (GICs) are definite times your advisor should be contacting you. Passive investment strategies, such as Exchanged Traded Funds (ETFs), may require less contact than active strategies. Even within active management, the number of phone calls can differ significantly. As an example, an advisor recommending equity mutual funds for their clients may not require as many phone calls as an advisor who is investing in individual stocks.
Most clients initially look at communication with their advisor in the context of how many in-person meetings they will have in a year. Many advisors may ask their clients how often they would like to meet in-person, with choices typically being quarterly, semi-annually, or annually. The frequency of in-person, periodic meetings may fluctuate as you and your advisor determine what is most appropriate.
In-person meetings are essential for new clients, especially when reviewing new types of investments (i.e. preferred shares, common shares, and convertible debentures). The base understanding of the different type of investments will allow different forms of communication in the future, such as telephone calls. An advisor may phone you with recommendations between the scheduled in-person meetings.
Comprehensive meetings can also be done over the phone. Scheduled time can be blocked off on both calendars. A meeting agenda should be emailed in advance of the scheduled portfolio review allowing you more time to look at the recommendations beforehand. An agenda for each meeting ensures that the time spent is productive and covers the items important to both you and your advisor.
An example of a meeting agenda relating to investments would be as follows: 1. Review market indices and relevant benchmarks year-to-date; 2. Macro view of current market conditions including a review of commodity prices; 3. Discussion regarding your Investment Policy Statement (IPS), and your current asset mix; 4. Detailed review of current investments with recommendations; 5. Options for any excess cash balances.
Your advisor can often assist you with items beyond investments. In advance of your meeting, you should ask your advisor to put the topics that are important to you on the agenda. This will help your advisor determine the amount of time to set aside for the meeting and to determine whether any internal specialists or external experts will be required. Your advisor has relationships with accountants, lawyers, realtors, etc. who can assist with complex questions. Within each financial institution their are specialists that can also assist you, including full time financial planners, insurance consultants, trustees, bankers, wills and estate planners, etc.
Providing your advisor with your preferential contact information will enable them to contact you when necessary. Having all work, home, and cell numbers will enable your advisor to contact you quickly should an opportunity arise. We recommend our clients let us know the dates that they will not be accessible. If you are planning a long vacation, or a significant period away from home, then you should meet with your advisor prior to your departure. One of the challenges with advances in technology is the use of email, especially when you are on vacation. Many clients may feel that a trade instruction sent by email (written record) is better than a verbal phone call (no written record). Advisors can not take trade instructions by email for various reasons associated with risk. The following are a few of the risks: time difference of instructions, risk of failure to execute (i.e. advisor may meeting with clients out of town at the time of e-mail), inability to confirm that order instruction is provided by a duly authorized person, lack of confidentiality of client information, lack of receipt or untimely receipt of order instructions, difficulty in discussing details surrounding suitability and risk of investment, e-mail delivery and server interruptions, or inability to confirm vague or incomplete instructions (i.e. type of order, account number, quantity of shares) on a timely basis. Another risk of accepting trade instructions via e-mail is a practice known as “e-mail spoofing”. E-mail spoofing is the forgery of an e-mail header, or sender address, to make an e-mail message appear to have originated from somewhere other than the actual source, thereby making it possible to send a message enhanced to look like it originated elsewhere.
E-mail works well for confirming phone and in-person meeting times, adding items onto a meeting agenda, general discussion items, and for sharing investment ideas. When it comes to executing investment ideas, these need to be communicated and confirmed verbally.