5 Vital Questions Advisors Should Ask New Clients

The relationship between a financial advisor and their client is a delicate one. Dealing with a client’s financial future is a heavy responsibility for an advisor. How you approach the initial client contact and the questions you ask may mean the difference between a fruitful, long-term relationship or a lost client.

Below are five key questions to create a trusting financial advisor–client relationship. The following queries will show the client you want to understand them and create a platform for a transparent relationship. By starting out on the right foot, future misunderstandings can be minimized. These questions fall into three broad categories—relationship, risk, and wealth accumulation.

Key Takeaways

  • Successful financial advisors understand that their business is more than making market recommendations.
  • Getting to know your clients and understand their financial goals means building and maintaining rapport and understanding their hopes and worries.
  • It also means evaluating their ability and willingness to take risk, and establishing clear goalposts for success.
  • Here, we propose some crucial questions to ask your clients in the domains of relationship, risk, and accumulation.

Relationship Questions

1. What are your biggest money worries, and how do you hope I can solve them with you?

This may be the most important question to explore with a client. As an advisor, you are a problem solver, and you need to understand what is expected of you from the beginning. It’s also a great way to build rapport and show the client that you are on their side and want to improve their life.

2. Since investment returns go up and down, regardless of how talented the advisor, how much would your investments need to decline before you fired me?

This question has two purposes. First, it sets the stage for the investing reality that financial assets go up and down, regardless of the talent of the advisor. It also provides a starting point to educate the client about the particulars of investing in the markets. Second, the response to this question can be filed away for the future, so that if a client panics after a 5% market drop, you can revisit the responses to this initial question, while calming frazzled nerves.

Risk Questions

3. What percent loss in your overall investment portfolio would cause you great personal discomfort such as lack of sleep, worry, and despair?

Financial professionals generally measure risk by standard deviation or volatility. Both the investor and financial professional need to understand how much risk an investor can "stomach" before they are tempted to do something unwise, such as sell at the bottom or dump all of their stock mutual funds.

4. Under which scenario would you feel worse: if your mutual fund fell 10% and you didn’t sell it, or if you sold your fund and it increased in value 10% after you sold it?

Behavioral finance theory generally alleges that investors feel worse about losses than they do about comparable gains. Assessing how one feels about watching their investments fall in value versus selling and then watching the investment gain gives insight into an investor's risk tolerance. To get some real-life data, you might want to follow up and ask if this situation has ever occurred.

Understanding a client’s risk tolerance can also help the advisor and client determine the overall portfolio asset allocation. The more risk-averse investor will lean towards a greater allocation in bonds and fixed asset classes and a lesser percent in more volatile stocks and stock mutual funds.

Accumulation Question

5. How will you measure the success of your financial investment portfolio?

In investing, there is usually an investment benchmark return for the client’s portfolio. For example, if the client has a 60% stock and 40% bond asset allocation, then the investment portfolio returns would likely be measured against the proportionate returns of the S&P 500 and that of a Bloomberg bond index.

If the client responds to this question by saying they expect a 10% annual return every year, then the advisor must educate the individual about historical market returns, to avoid misunderstandings down the road.

What Types of Financial Advising Questions Should an Advisor Ask?

Financial advisors should ask three key types of questions—including past experiences with advisors, lifestyle and retirement/financial goals.

How Can You Have Better Meetings With Financial Advising Clients?

Holding productive financial advisor meetings means connecting with clients on a personal level and respecting their time. Other tips for better meetings include being engaged, not asking leading questions, and keeping industry jargon to a minimum.

What Kind of Questions Should Financial Advisors Ask?

Generally, the best types of questions for financial advisors to ask are open-ended. That is, they don’t have a "yes" or "no" answer. Examples include, what major life changes are you expecting in the future? What are your biggest financial concerns?

The Bottom Line

A long-term financial advisor–client relationship begins from the outset. By asking the right questions, listening intently to the answers, and creating an atmosphere of trust, both parties will be satisfied.

Article Sources
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  1. The LibreTexts Libraries, California State University. "12.3: Measuring Return and Risk."

  2. Charles Schwab. "Fundamentals of Behavioral Finance: Loss Aversion Bias."

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