Greg Sullivan, the keynote presenter at the CFP Conference in Hobart suggested that putting process around what planners do well is a major imperative for planners (Money Management, July 8).
Greg Sullivan, the keynote presenter at the CFP Conference in Hobart suggested that putting process around what planners do well is a major imperative for planners (Money Management, July 8). To keep ahead, small practices will need to develop exceptional standards (and keep improving them). Otherwise, armies of institutional planners will overwhelm them.
ProQuest, we argue, is just a small part of putting process around individual planner activity.
Although at first glance, there may seem to be a significant gap between the planning process promoted by ProQuest and the seemingly contrary views put forth by practitioners such as David Middleton, a more detailed review reveals an unexpectedly high level of agreement.
What does a scientific risk profiler actually do? It mirrors what a planner would do in the absence of a questionnaire, but with the addition of science and system. That is, form a view as to the client’s risk tolerance, by conducting a question-and-answer discussion about the client’s attitudes, values, preferences and experiences in matters involving financial risk.
They would then feed back to the client a written summary of that view in order to confirm that the planner’s understanding is accurate, and the planner may rely on that understanding. Once the client has confirmed the planner’s understanding, this information would be placed on the client’s file and incorporated into the client’s plan.
The planner would consciously, or sub-consciously, compare each client’s risk tolerance to that of their other clients.
The ProQuest system follows that same process with several key differences. The questions have been tested for validity and reliability and cover a broader range of topics than would typically be covered by a planner.
The questions are in jargon-free, plain English, which has been tested for ease of understanding and answering. Thus explanation or clarification by the planner is not required.
Because the questions are asked in a “controlled” manner, without the planner being involved, interaction with the planner cannot unintentionally influence the outcome. A plain English structured summary is produced automatically.
Each client is compared with a known, high level of accuracy against an Australian adult population sample.
This process does not replace discussion between planner and client. Rather, the completed questionnaire and the risk profile report become inputs to that discussion allowing a more accurate, more in-depth understanding to be reached far more quickly than by discussion alone.
What a client wants from their planner is a comprehensive, long-term financial plan that will help them manage their money better now and help them achieve future personal financial goals.
One of the important questions, stated or unstated, to be discussed with the client is how realistic are those goals?
In targeting an asset allocation, the reality check question becomes a discussion on the planner’s ability to construct an investment portfolio that both meets the client’s risk tolerance and achieves their future financial goals.
To answer this question, the planner must work with the client to develop financial goals from the client’s personal goals.
The planner can then address the reality check question with either of two approaches:
? Is the client’s risk tolerance sufficient to allow the rate of return that will be required?
? Does the rate of return that will be required involve risk within the client’s risk tolerance?
But to do this, the planner must be able to compare two separate assessments of risk, risk tolerance and risk required:
? risk tolerance as the level of risk the client says they are willing to take.
? risk required as the level of risk inherent in the return that will be required to achieve their goals.
The working through of these two risk assessments is the most critical work the planner will do for their clients. It can not be left to chance, assumption and untested methodologies. It must be performed through a robust process.
As Greg pointed out: “Our biggest misconception as financial planners is that we think we have to deliver the cheese, that our clients want us! They don’t — they just want the cheese —they do not care who gives it to them.”
Paul Resnik
ProQuest
Please let us not judge and condemn the quality of another’s work, ethics or
professionalism under the guise of superior educational qualifications (“Is the time nigh for a new association”, letters, Money Management, June 22 22/6/00.
In all professions, we encounter those who don’t live up to our expectations. Concerned members of the financial services industry such as ……..??? (sorry didn’t catch the name), have ample opportunity to guide, encourage and participate, not denounce, demoralise and segregate.
Contrary to the opinion of the anonymous correspondent, there is an abundance of decent, concerned professionals out there doing the right thing for their clients day in day out.
I ask also that you no longer provide opportunities for “anonymous” anything, including slander and derision. Should someone wish to proffer an opinion then let it be one for which they have the strength of character to stand accountable.
Julie Screen
PO Box 458
The Junction.
NSW 2291
