PERSONAL INVESTMENTS
HELPING YOUR CLIENTS REACH
THEIR GOALS
• What are their goals? What’s important to them?
– When there are many goals, ask which one is more important, what
are the priorities.
– What does retirement mean to them?
• How much are they willing to contribute to achieve their
goals?
• Other than the investments they have with you, what other
sources do they have in place to achieve their goals?
• Once a list of priorities is set, select the goal you want to
address and take the first step to building a recommendation.
Investor Profile Questionnaire
What types of investment are
they comfortable with?
• Different options carry
different levels of volatility.
• The Investor Profile
questionnaire will help you and
your client in this regard.
• Have the client sign the questionnaire and keep a copy in
your files.
• A client’s investor profile may change over time. Review your
client’s profile periodically by completing a new questionnaire
with them every few years or after a major life event (i.e.
marriage, birth of a child, new job, loss of job, etc.)
• More that a tool to establish a score. Pay attention to your
clients’ answers as they may be door openers for discussions
on their expectations and financial challenges.
Investor
Expectations
Investor Profile
GAPS
Plan / Strategy
Financial Goal
• Budget – Gap between what the client can contribute and the
amount used in the illustration. To avoid this gap, address the
budget element early on.
– “So Mr. X, how much of your monthly budget were you thinking of
dedicating towards attaining your retirement goal?”
• Investment return – Is the client’s expectation realistic?
– Ask your client what average annual return they are expecting on their
investments.
• Investment volatility – Does the client understand the
potential short-term ups and downs of his investment
portfolio?
Investor
Expectations
To attain specific
goal at a certain
date, needs
average annual
return of 7%
Investor Profile
GAP
Investor Profile is
“conservative”.
Expected rate of
return is 4%
annually.
Gap should be resolved before implementing investment strategy
• Possible solutions:
– Stick with the investor profile risk level and accept to reach the goal at a
later date.
– Stick with the investor profile risk level and accept to increase the amounts
being invested to reach the goal in time.
– Accept more short term risk and adopt an investment strategy that will
potentially generate the required rate of return to reach the goal in time.
• What does the client prefer?
• A combination of solutions can also be applied.
Managing your clients expectations by addressing the gaps early
on will prevent frustration and dissatisfaction.
• Look at the suggested investment solution corresponding to
the client’s investor profile.
• Address any gaps between the profile and the investor’s
expectation, and see if the investment recommendation will
change to address the gaps or if other solutions will be
elected (i.e. invest more, extended the goal deadline).
• Choose between a “ready-made” solution – portfolios of
funds – or use a customized approach by selecting a
combination of funds.
• Cash and liquidities (includes money market, GICs, Canada
Savings Bonds)
– Lowest volatility, low potential return.
– Risk of the return being lower than inflation
• Fixed Income / Bonds
– Some volatility, potential long term return higher than inflation, but
typically lower than equities.
– Bond funds tend to do well when stock markets drop.
• Equities
– High short term volatility, higher potential long term return for growth
compared with fixed income and cash.
• Except for the recommendations made for people at the ends
of the investor profile spectrum (i.e. maximum security or
maximum growth), all recommendations are a mix of different
asset classes.
• It is impossible to predict which asset class will perform better
from one year to the next.
• By diversifying, you lower the volatility of the portfolio.
• The weight of each asset class will depend greatly on the
investor profile.
• Establish the investment strategy based on the investor profile
and expectations/goals, not on short term market predictions.
• Geography
• Economic sector
• Management style
(growth, value, mix)
• Managers
• Duration / Terms (for those investing only in GICs or
bonds)
• The concept of volatility or risk relating to specific funds is a
bit vague and can be interpreted in different ways by different
people.
• Your interpretation of “mild risk” when talking about a
balanced fund can be totally different than your client’s
interpretation.
• Compare a fund’s average return with its annual calendar
return.
• Compare a fund’s average return with its annual calendar
return.
• Keys to establishing a strong business relationship
with your investment clients:
– Get to know their goals, priorities and expectations
– Establish their investor profile
– Bridge the gaps between their expectations and their
profile
– Establish an investment strategy
– Be as clear as possible about the volatility associated with
the funds you recommend by using the tools and
information at your disposal.