The Engagement Process

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Best Practice Principle: A well-defined engagement process leads to greater client and advisor satisfaction.


  1. The Six Step Financial Planning Process provides a “framework” for an engagement process with room to be flexible.
  2. Know the prospective client and their situation before inviting engagement

The Engagement Process

It is doubtful that there is any single activity that an advisor can make part of their modus operandi that would have a more positive impact than ensuring that there is a robust written engagement agreement in place for every client. (Note: the terms engagement agreement and letter of engagement are synonymous.)

Even advisors who have used engagement agreements properly for only a short period of time report that the benefits quickly become obvious. For the advisor who has functioned primarily with a “product transaction” focus that responded to a client’s individual needs, the use of an engagement agreement might, at first, seem unnecessary or more simply put – a waste of time. They may be of the view that defining the terms of a client engagement and committing them to writing is about consumerism or complying with a professional financial advisors’ practice standard. But, of course, it is much more than that. The proper use of engagement agreements is to provide a better service to clients and a sure-fire way to dramatically improve the efficiency of an advisor’s practice, which will result in enhanced net income. This effectively becomes the deal before the deal.

The rationale and explanation are simple and can be illustrated with a short story. Let’s assume that advisor, Bill Jones, is new to the financial services industry. After the New Year he conducted seminars to develop prospects for a particular type of investment fund. One of the attendees, Robert Hutchison, subsequently invested $5,000 in the fund that Bill Jones recommended.

One month later, Bill’s new client, Robert Hutchison, received a phone call from Carl Wong, a seasoned financial planning veteran who was referred to Robert by one of his clients. During the telephone call, it was agreed that Carl would meet with Robert and his wife, Marilyn. At that initial meeting, Carl took time with Robert and Marilyn to explain how the services that he provided could enhance their financial well being in a number of ways. In fact, Robert and Marilyn could immediately see how working with Carl would help them evaluate all of their objectives and thus improve the chances of achieving them. They had no hesitation in signing an engagement agreement that outlined the complete terms of their engagement, including the details of all the services that Carl would provide.

From Carl’s perspective, in far less time than Bill Jones took to find these new clients and sell them a small, single investment product, he was able to prepare the following for Robert and Marilyn:

  • A Retirement Planning Analysis and subsequent Investment Policy Statement that led to Robert and Marilyn consolidating all of their $233,000 in investment assets under Carl’s management as well as setting up new Pre-Authorized Contributions for their future savings
  • An analysis of Robert’s and Marilyn’s situation in the event of death and disability, which immediately led to several substantial insurance applications being completed

Additionally, of course, Carl was rewarded with several referrals because Robert and Marilyn were so delighted with the Retirement Planning Analysis he had done that showed them how Robert could be in a position to retire at age 56 by simply changing their investment strategy and savings habits.

A Laborious Client Development Cycle

To add emphasis to this argument in favour of obtaining an Engagement Agreement from every client, let’s see a picture of what Bill Jones was doing to secure new business. The following diagram shows the typical steps followed by many advisors in developing a client. It illustrates how the typical client development approach is laborious, inappropriate and not totally effective.

In a transaction-driven advisor’s world, the Approach for an Appointment is made with a “product” in mind. It could be insurance, a segregated fund that offers attractive guarantees during a protracted bear market, an RESP, an RRSP (because it’s that time of year), or a mutual fund, etc. If the approach happens to coincide with and “fits” the client’s perceived needs of the moment, an appointment may be granted.

From that point forward, the advisor then works diligently (and as quickly as possible) to complete the remaining steps to get to “pay day” which occurs at the Implement Product Recommendations stage. Along the way, often driven more by compliance requirements than for any other purpose, the advisor will complete a Know Your Client (KYC) assessment. Unfortunately, all to frequently, it is thought that the time and effort to gather the information needed to complete the KYC form is “wasted” except, of course, to make certain that the investment is suitable.

In the case of our new advisor, Bill Jones, he failed to realize the benefits of an effective client meeting. He should have taken a little more time to find out Robert and Marilyn’s values, goals, and objectives. He then could have aligned the breadth of his service offering with their declared values. This would have opened up a whole new viewpoint for the client, a world of opportunity for him, as well as thwarting any competitive overtures.

Why Engagement Agreements Work so Well

Which arrangement do you prefer?

A. Service by Transaction (Salesman)

  • Not knowing if a client is really interested in hearing from you
  • Not knowing for sure what a client is expecting of you
  • Not knowing if the client will keep you informed of changes in their situation
  • Not knowing for sure when or how you will get paid

B. Service by Engagement (Trusted Advisor)

  • Knowing the client thinks of you as their trusted advisor
  • Knowing what services you will provide and under what terms
  • Knowing that the client has agreed to contact you with any changes in their situation
  • Knowing when and how you will be paid

And looking at it from a client’s point of view…

A. Service by Transaction (Salesman)

  • Hoping that the investments they bought will go up in value
  • Hoping there was no undisclosed compensation that might compromise the recommendations
  • Hoping you will provide the service they need
  • Hoping their advisor will be responsible when helping them as they may require

B. Service by Engagement (Trusted Advisor)

  • Knowing there is an Investment Policy Statement that outlines what they can expect with respect to the process of managing their money
  • Knowing exactly how their advisor is paid
  • Knowing the level and range of service they can expect
  • Knowing they have a written agreement to fall back on that even tells them how to handle redress

From both the advisor’s and the client’s point of view, it is obvious which arrangement is preferred.

A Superior Client Development Process

Now here’s a picture of a Client Development process that is clearly superior to the one described previously and is, in fact, more like the process that the veteran advisor in our story, Carl Wong, followed. We see how it’s possible to create a client development cycle that is efficient, effective and professional

Note that the process now begins with a referral to a prospective client. Top advisors long ago learned that referrals are typically much easier to obtain when they have provided a comprehensive service rather than simply sold a product. Most importantly, this process acts as a filtering system separating good prospects from the rest. A frequently used method for doing this is to request that the prospective client bring certain documentation or information with them to the first meeting so both the advisor and client can determine if they “qualify” for each other’s investment of time and effort. It’s important to note that a good client doesn’t necessarily have to be a comprehensive planning client. Modular planning clients can be just as important to the practice.

The initial Engagement Discussion is used to determine if the advisor can be of service to the prospective client. If, following the discussion, there is agreement on that point, an Engagement Agreement is completed and, ultimately, a plan designed to meet all of the client’s needs and objectives is developed. With the Engagement Agreement in place, there is never a question as to if or when the advisor will be compensated because as part of that agreement the client agrees to implement any plan that is developed to meet their needs. Further, rather than providing service on an ad hoc basis, all the client’s service requirements are rendered in accordance with a definitive written action plan.

The foregoing seems intuitively obvious, so why don’t all advisors have a written Engagement Agreement with every one of their clients? The reason most often cited by advisors for not using an engagement agreement is simply that they lack the knowledge of how to get clients positioned to accept the idea.

Getting Clients to Want to Engage You as Their Advisor

Before most clients are prepared to endorse an engagement agreement, some level of respect and trust in the advisor must be established. Respect is gained when an advisor can demonstrate their competence, and trust grows out of strong relationships. People normally trust one another when they feel that the other person has everyone’s long-term interests at heart. Trust leads to a willingness to help each other. In the advisor/client relationship, this means having the client willing to provide all the information the advisor requires to do their job well. Clients will be willing to do so as a result of the advisor demonstrating that they have a sincere concern for the client’s well being.

So before advisors are in a position to seek engagement, they must first demonstrate that they have a real interest in the client’s life values, their financial goals and objectives. Top advisors have a definitive process to build trust and facilitate engagement. What follows is an outline of an engagement process that is easy to learn and easy to use.

Simple Engagement Process

This process is designed for use with the Initial Assessment & Evaluation questionnaire starting a little further on in this section.

I. Positioning - Start out with a positioning statement to the prospective client as to what the process will entail. (Note: the same process can be used for existing clients you have elected to convert from a “transactional” approach to a “service approach”.) A marketing brochure can be an effective aid providing the content focuses on the process and is not a “general services” type of brochure.

Tell the prospective client that you have a process designed to help you find out more about their situation so you can determine if you can help them. Then if you feel you can help them, you will also determine what level of service would be most appropriate for their situation. (Note: This approach need not be used literally. Your approach should ideally be customized to showcase your distinctive value).

II. Preparation for Engagement Discussion – Invite your prospective client to bring the following documents to the meeting:

  • Investment statements
  • Pension statements and plan description
  • Insurance policies, including group benefits information
  • Tax returns

Explain that, by reviewing this information, you will better be able to determine how you can enhance their financial well being.

III. Discuss Purpose – At the beginning of the first face-to-face meeting, confirm that the purpose of the meeting is to determine how you can help them. If you can help them, you will specify the service that you can provide that would be most beneficial to them. The length of the meeting would depend on a number of factors such as; the advisor’s practice structure and professional style, and how he prospective client came to the advisor.

IV. Discuss Agenda – Propose to the prospective client that you follow this discussion path:

  • You will ask some questions that will help you understand their values. For greater clarity please refer the first section of the IA&E Questionnaire below. There you will see four questions you can use to start the values discussion. The critical point is to talk with your client. Do your best to try to understand what is important to them. What is it that drives them?
  • You will ask some questions so that you understand their financial goals and objectives, as well as any financial concerns they have
  • You will look at the information they have brought with them and put a summary together
  • You will assess their situation
  • If you can help, you will explain what services you can offer and how those services would be provided

V. Follow the agreed agenda using the Initial Assessment & Evaluation questionnaire as a guide. A description of how to use and understand the Initial Assessment & Evaluation follows.

  • Section I. – Ask the questions. The questions are designed to help understand the prospective client’s values and record their candid responses.
  • Section II – Ask the questions and record their objectives
  • Section III – By reviewing the documents they have brought with them, fill in the Type of Asset and Cash Flow segments. For information that is not available, ask the prospective client to estimate it. Estimates are fine at this point in the process. Note: Do not try to do the Asset Allocation segment unless it is extremely simple. Complete the Life Insurance, Disability Insurance, and Pension segments.
  • Section IV – This section is intended to be the advisor’s quick assessment of their situation. If the advisor has sufficient experience to do an “on the spot” preliminary assessment of their situation after reviewing the documents and answers to questions, follow through by outlining the type of service that is recommended.
  • Section V. – This section proposes the next action to be taken. Typically the “objective” for the next meeting would be to consummate an engagement agreement, and collect the detailed information that would be required to offer the service proposed.

Many Paths Lead to Engagement

The Simple Engagement Process just outlined can have a number of variations to fit the needs of the advisor’s training, education, and experience as well as the client’s circumstances. For example, at the conclusion of Section III, the advisor may elect to do further analysis or consult with another advisor before doing an “assessment” of the situation. (This would be the appropriate action for anything outside of the advisor’s area of competence.) In an ideal professional practice, the advisor would have a more-or-less automated process in place for collecting information that could be immediately entered into a financial needs analysis software program to do a preliminary analysis of:

  • Retirement goals
  • Needs in the event of death, and
  • Needs in the event of disability

An analysis such as this will be referred to in this document as a Client Planning Assessment.

A review of the Client Planning Assessment should highlight if a problem is present that requires a more detailed analysis, for example, a needs analysis in the event of death. If so, the engagement sought at the next meeting should include performing that analysis.

This process can be easily tested. Simply take the data you’ve collected and go to the Advocis Best Practices Resource Library located at There you’ll be able to register for access to Web-based planning, specifically the online Client Planning Assessment. You can now complete a sample Client Planning Assessment. Note: a sample of the output can be viewed at the end of this section (a generic CPA).

A similar process may also be appropriate for prospective clients whose needs are more basic and not likely to qualify for your full range of services. In such situations, the Engagement Agreement can be easily consummated at the first meeting rather than at a subsequent meeting.

An advisor who is working with more affluent clients may not elect to review the prospective client’s documents at the first meeting at all. Instead, solely through supplementary questioning in Sections I and II, the advisor would be able to articulate how the service that they were proposing would help the prospective client reach their financial objectives. That may be all that is required to facilitate engagement, especially if the prospective client was referred and credibility was established prior to meeting the first time.

The important thing to keep in mind is that a well-defined process is required that allows advisors to gather sufficient financial data which leads to an overview of any basic problems and opportunities – before “engagement” can be completed.