Questions I ask clients (and why I’m not afraid of roboadvice)

Sonnie Bailey

28 June 2019

“I’m not racist, or a Luddite, but…”

If you want people to listen to what you have to say, a good gambit is to say “I’m not racist, but…”.

The room will go quiet. Necks will crane your way. And you get to say whatever you want in the spotlight of shocked attention.

“I’m not racist, but… I think Pirates of the Caribbean 3 was underrated”.

(For reference, that’s the one where Keira Knightley became the Pirate King.)

(Seriously – it’s a great movie!)

Of course, what you say should have nothing to do with race. But you can take advantage of the shocked attention. Call it a social life hack.

A weaker version of this is to say “I’m no Luddite, but…”

I’m no Luddite. And I have no fear of roboadvice in my industry – at least in the short-term future. In fact, I think there’s a huge amount of space for roboadvice in the financial advice industry, and that effective use of technology is essential in order to serve people who have traditionally been underserviced.

In fact, I embrace our robot overlords!

BUT! I think there’s a long way to go before robo advice can replace the advice I, and many other financial advisers, provide.

(Famous last words?)

Computers ain’t conversationalists

One of the best things about being a financial adviser is that you can have GREAT conversations with clients.

When I was a teenager, I had a hunger for “deep” conversations. Maybe I was in the wrong social circles, but it was a need that was rarely satisfied.

But nowadays, that’s what I get, week after week.

Most weeks, I have at least one or two in-depth conversations with clients.

By this, I mean conversations that last for three hours or more.

In these conversations, my clients talk candidly about things that my clients don’t share with friends and family members.

It’s a pleasure and a privilege.

We talk about their assets and liabilities. We talk about their income and expenses.

But that’s only a small part of the conversation. I really need to get to the heart of things.

We talk about:

  • Their family situation. I ask about their children, whether they have any special needs, their dreams and fears for the children, and how they want to assist their children get the most out of their life.
  • Their broader family situation. We often talk about their parents, and how their own relationship with money was influenced by their parents’ relationship with money growing up.

We talk about whether anyone – including parents, siblings, or anyone else in their orbit – might become dependent (financially or otherwise) on them in the future. If they have parents or others who are in a strong financial situation, part of the conversation also relates to what assistance these people may be willing and able to provide if, for example, major financial misfortune were to occur.

  • I ask hypothetical questions to get an insight into their values and priorities and what is most important in life to them. For example:
    • What would you do differently if money wasn’t an issue?
    • What would you do if you found out you only had five or ten good years of life left?
    • What are some worst case scenarios that you’d rather not entertain? (Because it’s one thing to focus on what you want to happen. It’s also important to manage the risks associated with what you don’t want to happen.)
  • I ask questions to get an insight into their psychological tolerance for risk. I ask questions like what you’d see in an online risk tolerance questionnaire (like here). But I ask questions in a more open-ended way. For example, I usually ask:
    • When it comes to investing, what does “risk” mean to you?
    • How would you characterise your tolerance for risk, compared to other people at your age and stage?
    • How would you describe your experience with investing?

These questions don’t lend themselves to multiple-question answers. They lead to discussions, which reveal nuances and complexities that “yes”, “no”, or “maybe” responses can’t match.

  • I ask about their succession arrangements, and how they structure their financial affairs. Do they have corporate structures? Do they hold some of their assets in one or more trusts? If there are trusts, who are the beneficiaries, and are there any restrictions or constraints in how they can invest? (I’ve never seen a piece of software that has come close to capturing the combinations and permutations that I’ve encountered.)
  • What are their expected cash flow needs for the coming future – and what are the probabilities of these cash flow needs?
  • What other risks are relevant to their situation? For example, do they have concerns regarding the stability of their role or their profession?
  • When it comes to their specific goals and objectives, how do they prioritise them, if and when they need to make trade-offs?
  • I play devil’s advocate (although I prefer to call it “devil’s avocado” for some reason), and ask them to entertain goals and objectives that might not have occurred to them. Common examples include working less, retiring earlier, trying something different professionally, or spending more on themselves and/or loved ones and causes they care about.
This is me, after a 3+ hour conversation. Emotionally exhausted. But also amazed at how everyone is different, and awesome in their own way.

These conversations are central to the advice I provide.

Talking about these topics, and getting a holistic sense of where clients come from, also creates a relationship of greater trust and means they end up being more confident with the advice I provide.

It feels like I’m mining people’s souls.

Maybe, one day, a roboadvice service will be able to discuss these sorts of topics in a holistic, comprehensive way.

At the moment, the roboadvice services I’ve seen are extremely narrow and myopic. They’re also created by product issuers who have an obvious incentive to recommend their own products – making them something of an automated sales tool.

Computers ain’t great conversationalists.

And computers with ulterior motives are even worse.

For the foreseeable future, I’m pretty confident that there’s no substitute for the human touch when it comes to advice.

Which is great for me – because it means I can continue to have terrific conversations with terrific people!


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