Your financial advisor needs to start off with a full fact find to determine your long term financial profile.

A portfolio manager who does not do this personally would need to obtain this information from someone who has, in most cases your financial planner.

If financial planning and asset management are carried out separately, it is important that the work carried out by the two is integrated.

Information collected by the financial planner should be used by the portfolio manage to construct portfolios.

All investment assets

The advisor would need to find the size and disposition of all your investments including your cash deposits and any expected inheritances, bonuses, stock options etc.  This would also include the disposition of your defined contribution pension plans and RRSPs and/or RRIFs.

It is important that all portfolio construction, planning and management, where assets are to be used to meet financial needs, take account of the disposition of all your assets. 

If you are not handing all your money to one advisor, at least one of your advisors needs to be in control and all your advisors aware of the overall asset allocation decision (s).

All expenditure, income and capital and all earnings and income from all sources

Your advisor needs to find out your current and planned future expenditure as well as your current and expected future earnings.

This should also include details of any defined benefit pension plan, income from trusts or any other source of income other than income from your investments. 

A proper analysis of financial needs also includes details on all expected capital expenditure. You may replace your car every 5 years, you may plan to purchase a cottage, go on a big holiday, you may have to pay a large tax bill, wish to purchase an overseas property, buy a business, pay for your children’s weddings, pay down the mortgage, renovate etc.

Financial objectives

Your primary advisor needs to find out your objectives, what you want to spend in retirement, any education expenses, when you intend to retire, your wishes for your estate and details of your wills. They also need to find out your life insurance position, disability, long term care, permanent health insurance and so on.

In fact (where assets are to be used to meet financial needs) no portfolio should ever be constructed without knowledge of the client’s total financial position. A portfolio that has to meet your financial needs over time cannot be successfully structured, planned or managed without this information.

Most retail know your client forms and risk assessment questionnaires will only ask for information regarding your time frame for investment and will not go into the detail needed to properly construct a portfolio let alone manage it.

The reason, is that most systems used do not actually use financial needs to construct portfolios. Most "know your client" forms require the basic minimum information that organisations use to align a model portfolio option to each client..

As discussed in risk profiling and risk assessment, your advisor needs to educate you about the basics of investment, about their investment discipline, about how they will run your money and how they will go about managing the key investment risks.

They need to assess your attitudes to these risks and explain to you the effects of these attitudes on the ability of your portfolio to meet your needs, risk preferences and financial objectives.

This first risk assessment should only be a preliminary assessment and should only be used to develop the investment planning and portfolio management report.

After the client has read the report and/or has met to go over this report, the risk assessment needs to be confirmed.

A copy of your risk assessment should be given to you!

All asset and wealth management agreements require a client agreement.

In reality many client agreements are not worth the paper they are written on.  Those that have value are backed up by a strong, focussed, professional and ethical organisation and clear standards and expectations of service. 

Most importantly of all, the best agreement is one based on the facts, objectives and reasoning of a comprehensive investment planning and asset management report.