Martin Dobson of Avenue Capital Management explains the steps involved for financial advisers in Australia when acquiring clients, setting up their accounts, and advising them appropriately.
Date: Nov 2010
Tags: Advisory process, Financial planning, Risk tolerance, Suitability, Expectations
In the process of providing financial planning advice, Martin Dobson said in an interview that clients tend to come to advisers in Australia for various reasons. Either they have a specific goal they want to achieve in a certain timeframe. Or they want a mentoring arrangement, where they simply want a second opinion on their existing portfolio. Or they want to use an adviser to place specific investments rather than create a holistic financial plan.
However, Dobson said there are some people he is unable to help, so it is important for advisers to not take on clients where they think they cannot provide the service that the client wants.
Step-by-step advice
At an initial meeting – or possibly beforehand by email – Dobson said an adviser in Australia provides a client with a financial services guide, which is a document explaining who the customer is dealing with, and whether the adviser is licensed and authorised to provide certain services. It also sets out certain fees and charges, as well as recourse options to settle any disputes and claims against the adviser.
In the first meeting, initially there is a fact-finding mission. Integral to the process, explained Dobson, is getting to know the client, to understand things like their purpose for coming to get the advice, who is important to them in their life, and where they are headed.
A lot of this is done without any focus on money or investing, he said, and instead is about trying to understand the client’s mindset.
Doing a psychometric test is an important part of this process, added Dobson, to give the adviser some objective measure of the client’s risk tolerance at a certain point in time.
Given that many events can influence risk tolerance, he said it is important to understand these if a client wants to invest, as they need to be comfortable with what they are investing in.
Collecting customer data
Dobson said it is also important to get details of personal assets, as well as the client’s investment objectives, in addition to any events they foresee which might influence these, such as children’s education.
The plan needs to take into account these situations and prepare for them by protecting the wealth they have got now – generally through insurance – and then being able to create more wealth, he explained.
The actual investment side is then where the adviser can be creative, although Dobson warned that it is easy to fall into a trap of trying to be too sophisticated.
While there are various models and scenarios to use, ultimately it is important to match investments with a client’s expectations.
Evolving relationships
To make sure everyone’s interests are aligned, and to re-evaluate the expectations of the client on an ongoing basis, Dobson said planners tend to review portfolios at least once a year.
One of the requirements of the licence which financial planners in Australia have is to ensure they have communicated with their clients regularly and done portfolio reviews, he explained, including capturing any changes which might have taken place.
The advisers also monitor a client’s investment portfolio on an ongoing basis, and communicate with them regularly if they think any amendments or modifications are needed between reviews, he added.
