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Using the client’s own words doesn’t always help

7 October 2020

riting a financial plan using the client’s own words doesn’t always provide a defined picture of what the client wants and an actionable strategy, says Jacqueline Lockie, head of Financial Planning, CISI.

This article was first published in the October issue of Professional Paraplanner.

I’ve written a few articles in the past about how I (when I was a paraplanner years ago) and you, as a paraplanner now, write financial plans for clients. I came across an interesting example recently that I think you might be able to identify with. Plain English is not as easy as it first sounds when it comes to explaining things to clients and putting together a financial plan.

One of the biggest qualities I see regularly in paraplanners I meet is the ability to critically assess multiple options for various client circumstances. Clients often arrive (virtually probably at the moment) with more than one objective they want help meeting. So, this conflict of meeting those objectives and thinking through the options and various implications to find the best fit, is very important.

Considering the implications of the financial plan you are drafting is key to the client’s understanding. Your ability to spot anomalies and write a clear plan for the client might need a bit more work. Let’s look at my recent example:

A client retiring in 12 months currently has a 40% equity, 60% debt portfolio split. A full financial plan and review took place a few months ago. The client says he will move to a 50:50 portfolio IF one or more of the following things happen:

  • If he gets his final payment from work
  • If markets fall by 20% in the next year
  • If markets fall by 20% in the next two years.

The plan states all of this and then says; “we might consider doing this if your risk profile is appropriate.” I have a few questions…

1. What is appropriate? What does that mean exactly?

2. “Might consider” why only might? What does that mean for the investment advice being given? Does that mean the adviser/manager should automatically execute the instruction to move the portfolio to 50:50 split if one of those events are triggered?

3. There is no signed investment mandate for the switch as it was not clear (so the reality is that nothing can happen)

4. Should there be a financial plan review at the time of the trigger to switch? Nothing appears to have been discussed with the client or documented.

5. Will the client understand this? Will they really know exactly what is going to happen and when? I’m not sure I do!

6. How might the client interpret this information in the plan? I think it is very likely that they won’t be sure or fully understand.

When writing financial plans we often do our best to use as much of the client’s own language as possible. We know that will help them understand as they will see themselves reflected in it. We also need to add in a certain amount of jargon too. But mixing the two can lead to misinterpretation and confusion, which seems to have happened here. Mixing what was said and what actions were later decided hasn’t worked.

Proofreading the financial plan picked up this example and it has been clarified. But the paraplanner who wrote this was very happy with the initial explanation. They were clear on what was going to happen.

How do you pick up these sorts of issues where you work? Are there any lessons you can learn to help you in the future from my example? What’s the saying?…’Teamwork makes the dream work’. Sounds about right to me.

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