Introduction

The fact find phase of the advice process is arguably the most important phase when determining the best option to meet your clients’ needs. Otherwise, how can you be sure you know enough about them and their finances to know whether your advice is suitable? This is even more important when considering your retirement clients as their needs are so much more complex due to the choices now available to them. Ensuring you ask the right questions means you and your client can be confident in your choices.

It’s also important to ensure your clients understand how important this phase is. Research shows that despite the fact that a majority of clients (60 – 65%) are interested in an adviser’s expertise and help planning for the future, many don’t take the fact find phase as seriously as they should. There can be many reasons for this – some may feel uncomfortable answering such personal questions; some may be burying their head in the sand about their financial situation; and others simply won’t have thought about their financial affairs in enough detail to answer your questions. Whatever it is, you need to try to overcome this and ensure you get the information you need to make the right recommendations.

This module is designed to help you meet both of these objectives.

It’s likely you currently use a fact find questionnaire of some description to capture basic information about your client, their family, their dependants and any health concerns they may have.

Top tip: send your fact find questionnaire to your client in advance so they can prepare for your meeting.

However, while this information is still relevant for clients in retirement, it does not capture everything you need to know about them.

Understanding your client

Of course, fact finding is a lot more than simply finding out a client’s date of birth and national insurance number. In fact, our Generation Advice report (November 2015) found that 75% of clients felt that ‘being understood’ by their financial adviser was the one thing they valued above everything else.

Therefore, in order to truly tailor your advice to their needs, you must try to get to know them as a person so you can understand their goals and dreams. This is particularly important for clients approaching or in retirement, as many people have been looking forward to their retirement for several years and they often have a very specific picture of how they hope it will be. Asking the right questions not only helps you to turn that dream into a reality (or reset expectations if their dreams are not achievable), but it also lets the client see that you care about them as a person. This will mean they are likely to keep coming back to you as they will trust that you are working with their best interests in mind.

You may even find that a client’s beneficiaries may decide to keep their assets under the management of your firm once they have been passed down to them as they know their benefactor was so happy with the service they received from you.

While this is by no means an exhaustive list, here are some examples of additional questions you may wish to ask your retirement clients, broken down into categories:

What does retirement mean to you?

  • Do you want to stop working altogether, keep working as long as possible, or gradually reduce your working hours?
  • Do you have a specific age in mind?
  • Will you want to sell any assets, such as a business or a property?

How do you want to live in retirement?

  • Are there any once in a lifetime dreams you want to fulfil?
  • Have you any plans to move abroad, or purchase a second property?
  • Do you anticipate living in your current house or downsizing?
  • When will you need to generate retirement income and how much?
  • Will you need your income monthly, quarterly or annually? Does it have to be paid on the same day?

How much risk can you afford to take with your income?

  • Do you need to pay specific bills or regular payments out of this income?
  • Does it matter if some or all of your income fluctuates, and goes up or down? How much?
  • If this income was not paid out how long could you last from other sources? What other income sources or assets do you have available?
  • How important is certainty of income, is there a minimum you need to meet?

How much risk do you feel comfortable with?

  • Would you rather take some risk with this income to see if you can get more even if this means it may go down and you could lose it altogether? This could be on all or just part of your income.
  • Is it important for you to retain flexibility accepting this comes with some additional risk, or would you prefer to make an irreversible decision in return for greater certainty of income?
  • Are you more concerned about the risk of inflation eroding the relative value of your money, or investment fluctuations eroding the absolute value of it?
  • Are you comfortable with retaining an ongoing involvement in managing your retirement income, albeit with professional help, or would you rather make a decision and then forget about it?

Preparing for the worst

  • How healthy are you? Do you have any illnesses or any concerns about how long you might live, or require income for?
  • Do you have any future financial obligations to meet, such as debts?
  • Do you have dependants, such as family, who would be reliant on your income when you die? When if at all, would this dependency end?
  • Do you wish to leave an inheritance?
  • Should you need specialist care or additional support in later life, do you have any views on what type of care or support you would prefer?

It’s also important to keep in mind that the retirement decision you help your client to make now could be irreversible. Therefore, make sure you consider the following risk factors too when compiling your retirement questions:

Risk Factors

  • Their state of health
  • Whether their pension savings offer any form of guarantee
  • The ongoing needs of their partner and/or any dependants they may have
  • The effect of inflation
  • Whether they have considered all the options available to them
  • Whether they will have a sustainable income in retirement
  • What the tax implications are
  • Whether they understand the charges involved
  • The impact on any means tested benefits
  • Any debt they have – how will taking their pension affect this?
  • Are they aware of pension and investment scams and what these look like?

Implementing a Centralised Retirement Proposition (CRP) will help with many of these questions.