Manage your client’s expectations
The key is classifying your clients according to the level of service they expect, the level of service they need and the level of service they are prepared to pay for.
Managing your client’s expectations, a kind of triage, is critical.
You must be able to quickly assess the level of service they expect, and then match this to the level of service they need.
Some clients will expect more than they need. This can usually be dealt with, and the client will be happy. Other clients will expect less than they need. This can usually be dealt with too, but the client will usually be less happy as they will have to pay more.
Agreeing the level of service the client is prepared to pay for should happen early in the conversation, ideally in the first meeting or soon thereafter. It should be recorded in your SOA and supported by other written evidence such as file notes and e-mails.
If agreement cannot be reached you are better off ceasing to act and letting your client find an alternative service they are prepared to pay for.
Learning how to diplomatically manage your clients’ expectations is a key part of creating a professional practice.
An ASIC example of managing a client’s expectations and scaling the advice
Example 13 in paragraph RG 175.276 is an example of revising the scope of your advice based in the client’s preparedness to pay.
This example is not based on risk insurances but nevertheless shows what you should do when faced with a limited budget client. It’s a short example and bears reproducing in full.
Example 13: Revising the scope based on a client’s ability to pay
A client in their early 40s asks an advice provider to review every aspect of their financial situation to determine how the advice provider can maximise the client’s savings over the medium and long term. The advice provider gives the client an estimate of the cost to prepare the requested advice. This amount is more than the client is willing to pay for the advice.
The advice provider then identifies the key areas that they think the client should receive advice on, based on the objectives, financial situation and needs that the client disclosed to the advice provider in their instructions.
The advice provider suggests that the client could seek advice on a more limited subject matter. The advice provider also explains the risks of not receiving advice on the other areas that are not covered in the revised subject matter of the advice. They then give the client a revised estimate.
The client agrees to receive advice on the revised subject matter, and acknowledges that they understand the risks of receiving advice that is not as comprehensive as their initial request for advice.
The advice provider gives advice on the revised subject matter of advice sought by the client. The advice provider also provides the client with some factual information and resources for the areas of advice that are not relevant to the client right now, but may be in the future.
This example illustrates how an advice provider may work together with the client to revise the subject matter of advice the client is seeking, where the client is not willing to pay for the cost of advice they initially requested.