The first step in the process of financial advisory is being able to understand the client’s financial health. A person can’t properly plan for his or her future if they don’t know where they stand today. It is but typical for the client to be asked to complete a detailed written questionnaire. Their answers will help the financial advisor understand their situation and make certain they don’t overlook any significant detail.
A financial advisor will work with the client to get the whole picture of their liabilities, assets, income, and expenses. On this questionnaire, the client will also specify their future pensions and income sources, propose their retirement needs, and convey whatever long-term financial obligations they may have. In a nutshell, the financial advisor will list all their client’s current and expected investments, gifts, pensions, and other sources of income and finances.
More subjective topics will also be touched upon in the investing component of the questionnaire. This includes risk tolerance and risk capacity of the client. Once the advisor has an understanding of their client’s risks and investment preferences, the advisor can then assist their client in determining their investment asset allocation.
This initial assessment can examine other financial management topics, like insurance issues and tax situation of their client. The financial advisor must be aware of the current estate plan, and if there are other professionals on their client’s planning team, like lawyers and accountants.
Once both the client and financial advisor understand the current financial position and future projections, they’re ready to work together on a plan to meet the client’s life and financial goals.