“The most important thing is not to stop questioning. Curiosity has its own reason for existing.”
— Albert Einstein
Answers awaiting better questions
Moving into compliance after being a financial adviser was a bit of a shock.
In some ways, they’re very different vocations. In other respects, they are scarily similar.
I knew Compliance Auditors (good ones at least) have a scary ability to get to the heart of matter, to identify both the problem and the solution, and to ask the questions that need to be asked. I thought that they gained that ability when they sold their souls to their Dark Master but the more advisers I meet the more I realise that advisers have the same gift (often just exercised in a friendlier fashion).
Professionals, in both disciplines, understand the value, and the importance, of the Discovery process. I’ve been told that every compliance failure has its roots in poor discovery.
I don’t know if that’s true, but I do know that most client complaints relate to inappropriate, unsuitable or unreasonable advice. Sometimes it’s really about returns or costs, but mostly it reflects the adviser’s failure to understand their client and their client’s situation.
As a professional, you are required to actively consider your client’s relevant circumstances in relation to the advice being sought. You also need to identify other areas which may be relevant, external to their initial reason for seeking advice. We’ve addressed your Best Interest Duty elsewhere on our site but remember that this requires more than a basic understanding of your client or a superficial acknowledgment of their needs.
In my experience, good advisers don’t just listen to their clients, they challenge them. By doing so during the discovery process, they increase the quality and quantity of information they have about their client, and this helps them understand, empathise with and engage their client.
The collection of the ‘factual information’ is not the most glamourous or interesting part of the discovery process. Sometimes it’s like pulling teeth, but if the client understands why you’re asking, why you need to know and how much better your advice will be if they answer, they’ll generally engage.
After I finish my review, advisers often share information with me that is materially connected to the advice I reviewed but was not recorded in the file, the file notes or the advice document.
The client file needs to contain all the information that is necessary for the advice which is given. It also needs to demonstrate that you’ve sufficient steps have been taken to understand the client and their situation.
Ask, and Ye shall receive.
Some simple ways to improve the quality of the answers you get, is to vary the way you ask questions.
I thought I’d start with rhetorical questions as these can be used as a tool to get your client thinking about the areas you are going to discuss. Rhetorical questions do not require an answer and are designed to promote thought and encourage us to start thinking and get our engines running. They can also be used to make an important point. “Who wouldn’t want to retire comfortably?” doesn’t cause me to start a list of these people, but it makes me start thinking about what I would consider to be a comfortable retirement.
Closed questions are generally factual and usually require a short answer, or in some cases, a single word such as “Yes” or “No”. You would use these types of questions when you want to uncover specific information. An example would be “Can I help you?” or “Can I please have your email address?” These types of questions will be mainly used when uncovering the black and white information, or for confirmation and understanding. Placement of these types of questions is important as they can quickly douse a flowing conversation if inserted at the wrong time.
Open questions are used for exploring areas within the client circumstances. They frequently begin with “What”, “How”, “Why” or in some cases, “Tell me” because they can also be constructed as a statement. These types of questions would be used to get more detail or developing the conversation. An example would be “What is important to you?” or “Tell me more about you plans for the future.” In my experience, this type of question will more than likely be used the most and is also an opportunity to uncover a client’s thoughts and feelings towards critical areas of their situation.
In our article on goals and objectives, we included an example of multiple questions within the same area. These can be called funnelling questions, and they are designed to help increase the level of detail and uncover a higher level of information. These can contain combinations of open and closed questions depending on the content and the information given in each question will have some bearing on the next. Examples include:
- Tell me what your ideal retirement looks like.
- What are some of the things you would like to do?
- How much income do you think you’ll need?
- Are you planning on relying on one source for this income?
- When would you like this to occur?
This type of questioning can be very beneficial in the areas where a higher level of detail is needed, such as risk profiling, prioritisation and insurances.
Leading or loaded questions are designed to subtly steer the answer, and when used correctly, can enhance the quality of discussion. There is a potential to influence so care must be taken when these types of questions are used. The positive aspects of loaded questions relate to the questioning technique above and can assist with exploring an idea further or gaining an emotional response. For example, if I asked you “How are you coping with the recent changes to education standards?”, I’m implying that you may not be feeling too positive about it. If I asked you “How are you feeling towards the recent changes to education standards?”, there is no prior judgement being made, and I am not implying anything. An example of when this type of questioning can be useful is when a previous piece of important information has been previously discussed and needs to be re-introduced to determine its affect.
The best way to improve the quality of the answers you receive, is to improve the quality of your questions. Ask better questions but please, please, please remember to record in the client file the awesome answers you receive.