What About Incompetent Clients?

A competent client cannot develop a good financial plan with an incompetent advisor.  Everyone seems to know that and there is no end of material about finding competent advisors and deciding how much they should be paid.  In addition, there is no shortage of regulation proposed and implemented.

What about this? “Is it possible for a competent advisor to develop a good financial plan with an incompetent client?”

Not so much material on that question.  It deserves some attention.  Probably not by regulators but by advisors.  Competent advisor / incompetent client turns out no better than the reverse.

The obvious next question is, “What are the attributes of a competent client?”

Here is an incomplete, disordered and not universally applicable list:

  1. They are at least moderately disciplined.
  2. They understand that the past, the present and the future are connected.
  3. They are willing to share and participate.
  4. They understand that their lifestyle is the principle thing to provide for and protect.
  5. Their lifestyle is within their reasonable means.
  6. They have or will have financial resources
  7. They understand that their future lifestyle depends on what they do with money today.
  8. The recognize that there are existential risks like death, disability, divorce, unemployment, and financial loss
  9. They recognize that debt drags their ability to finance both the present and the future.
  10. They are willing to learn
  11. They can understand and tolerate variability
  12. They are willing to change if circumstances turn out differently than they expect
  13. They are reasonably objective.
  14. They monitor their progress.
  15. They know how to create visions (goals)
  16. They know that they know too few of the details to be successful on their own.
  17. They know and believe that their financial plan is just a part of their overall life plan.

I don’t suppose there will be regulation to establish client competence, but advisors have choices.  Deal with the ones who are competent or who can become competent.  For the ones in transition, provide the necessary learning opportunities.

There is a rule that says only people who use and pay for a service can adequately judge its value.  That includes the unspoken condition that they are competent to judge.  If they are not, then you have no way to estimate how they will react to anything you offer or do. Random conflict.

Advisors court (both meanings) disaster when they impose plans without active co-operation.  Competent clients automatically participate.  Incompetent clients automatically do not.  Writing a check is not active co-operation.

Advisors control their own fate.

Contact: don@moneyfyi.com  

Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

This entry was posted in Insight to Business and tagged , , , . Bookmark the permalink.

2 Responses to What About Incompetent Clients?

  1. Hal Lumley says:

    We used to qualify our clients instead of acquiring them with no Pre-Qulification.We used to use Barmaid.Most will not know what this acronym means. I am not going let people know but it might motivate them to think about Qualified prospects. Your list is brilliant.

  2. Dan Anders says:

    excellent article and checklist!!!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s