Just like you should go to a doctor for regular checkups, financial advisors should perform regular checkups with their clients to review their investments, financial goals, and life changes.
You should be meeting and communicating with clients throughout the year, but an annual portfolio review is a chance to sit down together and dive deep into any changes in the past year and evaluate if the client’s current portfolio meets their needs. FINRA recommends meeting with clients for a portfolio review at the same time every year to make changes when needed. Are they moving towards their financial goals? How are their accounts performing? What has changed in their life and finances since the last review? Performing an annual portfolio review ensures every client has the best products for their needs and gives them a chance to ask questions.
What’s Changed in the Past Year?
Before jumping straight into the numbers, take time to chat and connect with clients, especially about any changes that occurred in the last year. Ideally, you already know about these changes from your periodic check-ins with clients throughout the year, but this is the time to pull them all together and make sure you have the most updated view of your client’s lives.
A client may not realize that a change is worth sharing with their financial advisor, so this area may require asking the right questions about things like:
- Job or salary changes
- Marriage, divorce, or the death or illness of a spouse
- New children or grandchildren
- Large purchases or outside investments, especially real estate
Understanding a client’s lifestyle, especially the changes in the past year, helps advisors create a plan that aligns with their personalities and financial needs. At a portfolio review, it’s important to understand the client’s current state to make sure the original portfolio plan still aligns with the client’s lifestyle.
Is Their Money in the Right Place?
The bulk of a portfolio review should be around the actual portfolio. The goal isn’t necessarily to showcase the balance and growth of various accounts and investments but to compare progress to a client’s financial goals and evaluate whether the current financial plan is still the best fit.
As you review their portfolio with the client, be sure to cover these important topics:
- Check the balances and progress of the accounts and evaluate if they are in line with the client’s goals. If the market has changed throughout the year, funds may need to be reallocated to hit the right balance and risk levels. If income has changed throughout the year, transfers and transactions may also need to be adjusted.
- Tax planning. Tax law changes regularly, so be sure that the client’s current portfolio is optimized for the most current tax year. This can include moving funds to other accounts or making income-based adjustments.
- Estate planning. Check that the client’s life insurance, beneficiary preferences, and will and trust are accurate. Changes throughout the year may lead to adjustments, such as adding or changing a beneficiary. It’s especially important to evaluate estate planning if the client faced family changes during the year.
- Retirement planning. Retirement is a major goal for most clients. During a portfolio review, check if they are on track with their retirement savings goals or if anything needs to be adjusted to get them back on the right track. A client’s view of preparing for retirement may change as it gets closer, so listen to their concerns and answer any questions as needed.
An annual portfolio review keeps advisors connected to clients and ensures that clients stay on the right path to their financial goals, even as life changes.
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