Recommendations
A recommendation is a verbal or written statement that a representative uses to propose a product or service that can address the client’s needs.
A representative who makes written recommendations demonstrates his professionalism by avoiding misunderstandings up front.
Suitability is a fundamental criterion to support recommendations. The strategy or product recommended to the client must suit him. A representative must take the time to know his client before making a recommendation for him. After fully learning about the client’s personal and financial situation (his objectives and, when he has an investment objective, his investment time horizon, his risk tolerance, and his investment knowledge), the representative is in a position to offer him an optimal strategy and products that suit him.
The representative must keep this information in mind when proceeding with the analysis to determine the suitability of the strategy or product in question. Even the most detailed financial needs analysis or investor profile is worthless when the suitability of the strategy or product is ignored when the time comes to make a recommendation.
The representative must also know his product, including its features and risks, because the product must also align with the client’s situation. Several components may help the representative evaluate the suitability of a product or strategy.
The following components are representative but not exhaustive, and help evaluate the suitability of a product or strategy. However, they may not apply in certain situations. As each scenario is a specific case, a situation may require analysis of specific items, or adaptations may be necessary.
| Insurance and financial planning | Mutual funds and segregated funds | Group insurance and annuities |
Factual information to know your client Investor profile Needs analysis Existing contracts Mandate Product features Insurance illustrations Estate planning Replacement notice Investment statements Documentation of the leveraged loan Notes in the client file | Client information Investor profile Retirement planning Investment policy statement Distribution of assets report Projections Product features
Investment statements Documentation of the leveraged loan Notes in the client file | Client and environment profile Mandate Employment policies or collective agreements Employee list Copy of current proposition, policy, and riders Employee surveys conducted Last invoice Renewal letters Insurer offers Notes in the client file |
Once the representative has determined that the product or strategy is suitable for the client’s situation and needs, he can continue to the recommendations step.
When the client’s situation is more complicated or there are several possible solutions, it may be useful for the representative to, after his analysis, write his recommendations in a succinct report that takes the client’s priorities and potential savings into account, to provide him with…
- a summary of the main points of the analysis
- the financial strategies recommended in order of priority and by type of need (insurance or investment)
- the features, including advantages and risks, of the recommended product(s)
- an explanation of the connection between the recommended products and the previously-defined needs
Obtaining a written recommendations report provides several advantages for the client. This report allows him to:
- better understand his representative’s process (it’s not always easy for the client to grasp the connection between the proposed product and his needs)
- better understand the product features and be even more likely to follow his representative’s recommendations
- have the satisfaction of taking control of his financial situation
Creating a personalized plan
To apply his representative’s recommendations, the client may need a plan that tells him what to do. The representative may create a plan for him that outlines…
- The expected results (objectives)
- Action items
- A timeline for each item (dates)
The representative must periodically verify the suitability of the investment strategy or products offered to the client. He may use this to confirm information about knowing this client.
