Making promises that an adviser can’t keep

This is a very common error, and perhaps an understandable one at that. Let us give you a common example:

The client lists the following financial objectives:

  • To retire at age 55; and
  • To retire in comfort.

The adviser then introduces their advice with a seemingly positive comment along the lines of “my advice will meet your financial objectives.” This statement contains an implicit promise that, if they follow the advice, the client will be able to retire in comfort at the age of 55. This is a big call.

Obviously, there are many factors that will influence whether and how the client meets these particular objectives. Those factors are largely outside of the adviser’s control. The client himself or herself has a little more control over it, but even then it will be things like the performance of the economy, government policy and whether or not the client remains in good health until the age of 55 that will dictate whether and how the client will meet these objectives.

That is the nature of most people’s financial objectives: they will rely on factors that are, to a large extent, beyond the control of any particular person or persons. Accordingly, SOAs must take care not to make promises that cannot possibly be kept. Absolute statements such as the one above are best avoided altogether. A much more nuanced introduction to the advice section of the SOA can then be included. Something like the following:

We understand that you would like to retire in comfort at the age of 55. For obvious reasons, no one can guarantee that you will be able to do that – or even that this will still be what you want when that age comes. But it is fair to say that most people should be fairly comfortable in retirement if they buy a home, pay off the mortgage quickly and contribute as much as they can afford to super. Our advice will address these aspects of your financial management.
The Dover Group