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Building the Business 101: A Year in the Life of a New Client

Here's how we handle new clients during their first year with our firm.

Veena A. Kutler and Annette F. Simon, 12/07/2006

This monthly series of articles describes the many steps and occasional missteps we took in building our financial advisory business, Mosaic Wealth Management. Mosaic is a fee-only comprehensive financial planning and investment management firm located in Bethesda, Md., a suburb of Washington, D.C. At this writing, we have about $50 million under advisement, 40-plus clients, two employees, an 1,100-square-foot office suite in a Grade A building, and the two of us--Annette and Veena--the principals and equal owners of the firm.

In the months since we began writing our column, we've received a lot of feedback from readers via e-mail and at conferences. Many people have asked us to describe our first-year process for a new client. When we first started the business, our answer would have been, "It depends on each client's needs and challenges." Over the years, however, we have moved away from that ad-hoc approach. Comprehensive management requires a great deal of data gathering and client interaction particularly at the front end. Through trial and error, we have learned to break it down into digestible pieces for ourselves as well as our clients. We have systematized our process so that while each client's needs are handled in a customized way, the meeting order and content is arranged in a pre-determined schedule.

Prospective Clients
Qualifying Process
The process for a new client starts when a person calls or e-mails the office expressing interest in Mosaic's services. Our client service manager, Andrea, generally handles these inquiries by providing some preliminary information to the prospective clients and screening for potential fit: Interest in an on-going comprehensive relationship is the main criteria at this stage. During this step, she also encourages them to take a look at our Web site if they haven't already done so. Our site is an in-depth marketing brochure, and in it, we have spanned the five Ps that prospective clients find of interest: people, process, philosophy, policy, and pricing. Prospective clients who seem to fit our practice profile are asked to complete an initial consultation questionnaire, which is available for download from the site or may be sent to them by our client service manager.

If appropriate, Andrea will ask one of us to speak to the prospective client in more detail.  In this call, we are seeking further measures of fit: In addition to interest in an on-going comprehensive relationship, does the prospective client appear to be a nice person to work with? Is there enough complexity in the client's financial life to justify our minimum fee? Is there an understanding of fees and what the range is likely to be given their situation? Because we don't charge for initial consultations we do our best to ensure a fit before scheduling an initial meeting.

Initial Consultation Meeting
The in-person initial consultation meeting is the next step. Both of us participate in this important first meeting. First, we spend a good deal of time listening. We want to know what a prospective client sees as the most important issues and to learn what the client is looking for in the advisor/client relationship. Next, we describe our services and explain how (and whether) we can add value to the client's life. We have a very detailed presentation that we keep in binders in our conference room. Because people have different learning styles, we offer them the choice of going through the presentation in the binder or just talking about how we work with clients in a more impromptu and interactive way. Most people choose the presentation, and we think they end up with a very good feel for our practice, philosophy and working style through this means. At the end of the meeting we quote a fee range and give them takeaways including a client agreement that they can sign and return to us if they decide to come on board.

New Clients
Getting to Know You Meeting
This meeting is scheduled as soon as we receive the signed contract and initial fee payment from a new client. We ask the client to gather all their documents and to mail or drop them off prior to the meeting or come in to the meeting with the documents. In this meeting we:

  • Take detailed money biographies of the clients. By asking some open-ended questions and doing a lot of listening we get a feel for client's values and relationship to money. Most clients don't mind and welcome this interaction. A few clam up and we don't push.
  • Review documents. We take this opportunity to review the statements and other documents the new client has provided for the planning process. This is also an occasion to discuss assets, income and expenses that may not show up in the documents provided.
  • Administer the Finametrica risk analysis questionnaire to each client. Finametrica allows us to quantify client risk profiles and link them to an appropriate portfolio. This data combined with the findings of our financial planning analysis allow us to make appropriate recommendations on portfolio allocation.
  • Discuss objectives and goals, including how we will measure the success of our relationship.
  • Ask new clients to provide user IDs and passwords for use in CashEdge, a service that we use for account aggregation. Because we are comprehensive in our approach it is important for us to have balances for all our client asset and liability accounts.

Data Review Meeting
Once we have received client data on assets, liabilities, income and objectives we input everything into MoneyGuidePro and print summary data reports. At this point, we schedule a meeting with the client to review the data and to make sure that we have captured and modeled everything correctly. Garbage in, garbage out is always true with technology, and we want to make sure that data is accurate before proceeding any further.

This meeting gives us a chance to discuss any issues that came up during our preliminary analysis and to look for any missing data points. Often clients see that something is missing in reviewing their preliminary net worth statement. We've had clients ask, for instance, "What happened to my bank account--I don't see it here?" or "Where's my home equity loan?" At that point, we'll say that we didn't know about that account and ask for details. We also use this meeting to have clients sign any transfer or account applications that have not yet been signed as part of the process of moving assets over to our custodian.

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