As many advisors know, I’m a big proponent of getting to know your clients before you even start to talk about investing their money. Part of the process includes understanding their goals and transitions (and how those are different from each other). But even before you do that, you need to understand the mindset behind their money—and that means having an insatiable appetite for being curious.

Here are a few core questions to get your “curiosity conversation” started:

  1. If I suggested buying 100 shares of Company XYZ, what would be the first three questions you would ask?
  2. What are the guiding principles and philosophy that you follow with your money?
  3. Are there any investments you would avoid as a matter of principle?
  4. What does your money represent to you? What price or sacrifice was made to earn this money?
  5. How do you define true wealth?

All of these questions help you understand your clients’ principles and values. And without understanding their principles and values, how can you ever expect to provide them with a solid financial plan?

The Oxford Dictionary defines principle as “a fundamental truth or law as the basis of reasoning or action,” and secondarily, as “a personal code of conduct.” What are the fundamental truths guiding your client’s decisions? Even more important, are they a good match for you as their advisor?

The principles conversation is intended to help both you and your client set some guideposts. After all, if you aren’t both headed in the same direction, what’s the point?

These questions help you understand your client’s rationale for investment decision-making. This is a simple way to respect how your clients think through and make their investment decisions.

Question 1: If I suggested buying 100 shares of Company XYZ, what would be the first three questions you would ask?

The answers you hear will act as an indicator of your client’s style of rationale, decision-making models, and criteria for investing. As important as it is to know how much your clients will invest, you also need to understand why they would be willing to invest in a company.

Your clients possess unique parameters of reasoning that they apply to their investment decisions. Wouldn’t it be great if you knew the parameters of reasoning for each of your clients before you called them with an investment idea, so that you could provide the rationale for the idea? By asking questions about your clients’ principles, you can observe their framework of reasoning, make notes in their file for future reference, and check your ideas against their profile of reasoning.

Question 2: What are the guiding principles and philosophy that you follow with your money?

Clients may need a moment to think through this question. But their answers will reflect the boundaries they have established based on experience and observation.

Every client has idiosyncratic boundaries that are much too abstract to be captured on a risk-tolerance questionnaire. Because these boundaries cannot be measured by a number does not imply that they are fuzzy. In fact, clients are quite clear about many of these philosophical and principle-based boundaries—for example, “I don’t borrow money to invest”, “I don’t invest in start-ups”, “I don’t like to be rushed when it comes to making decisions.” For many, these are hard and fast rules that are emotionally grounded.

Question 3: Are there any investments you would avoid as a matter of principle?

While many clients will nonchalantly dismiss any potential of conflict, others will speak with conviction and even resentment about arenas in which they do not want their money invested (for example, “sin” stocks like alcohol or tobacco). But there may be others that you won’t be aware of unless you dig deeper, such as a client who wanted to avoid HMOs because of a traumatic and life-threatening experience. Obviously, the list of criteria could be as long as the list of each client’s deeply-held convictions. Many clients today buy into the idea of alignment––where there is no disconnect between what they believe and feel, and how they invest and spend.

Question 4: What does your money represent to you? What price or sacrifice was made to earn this money?

The truly curious stand a much greater chance of becoming great advisors. One advisor I know started asking this question of every prospect. One day a man came to his office with a check for almost a half-million dollars and the advisor asked, “What does this money represent to you?” The man gave him a dead-serious look and responded, “Four months in traction—and don’t you lose one single cent of it!” That is exactly the kind of information you  want—and need—to know before you suggest investment vehicles. This question is a good way of getting that critical piece of emotional context.

Question 5: How do you define true wealth?

One suggested opening or setup for this conversation is to set the context with something like this: “In all my years in this business I have learned that it takes more than an account balance or checkbook to measure wealth—otherwise there would be no such thing as a happy poor person or a miserable rich person. That is why I like to take the time to ask each of my clients how they define wealth in their life.” Ask your client to define true wealth by completing the statements following this paragraph. This exercise and resulting conversation allows them to define wealth in a holistic fashion, which has proven to be a life-changing dialogue for many. Clients have discovered that the conversation helped clarify the role of money in achieving the various aspects of wealth that they desire:

1. How I define success in my working life;
2. How I define success in my family life;
3. How I define balance in my life;
4. How I define success in my financial life; and
5. How I hope to be remembered some day.

Once a client provides this description, you can respond by saying, “This gives us the guidance we need so that we can use your assets in the best possible manner to bring about this definition of wealth in your life.”

Never lose sight of the fact that behind each client’s story of money are the experiences and events that shaped their lives and their thinking about money. Those experiences and events have forged certain ideals and principles into place that are now permanently associated with their money. The wise advisor understands this relationship, and the truly curious advisor will unearth those ideals and principles before forging ahead.