One of my most important messages bears repeating in today's tough marketplace: If you want to be a successful advisor, you've must take a consultative approach with your clients at every stage—including the investment planning process. A consultative approach uses a defined process to ask each client detailed questions that allow you to formulate a formal, comprehensive investment plan built around custom solutions. This is a big part of what true wealth management is all about.

This approach stands in stark contrast to the traditional method of asking a few questions focusing on a specific set of issues, such as investments, and then making a recommendation for a specific product that addresses a specific question. You can no longer operate effectively using that highly simplistic model—especially not in the current market downturn, when research shows that four out of five affluent clients are thinking of switching to new financial services professionals.

A formal investment plan is one reason why top advisors are more successful than their peers. Consider that 81.9% of wealth managers who earn an average net income of $881,000 provide their clients with formal plans. By contrast, just 37% of investment generalists do so. Their average net income is $279,000—more than $600,000 less.

The upshot: The financial services industry you have known in the past is not the industry of the future. You've got to rise to the occasion—and consultative client management is a big part of doing so.

Preserving Wealth

I've reviewed aspects of consultative client management—such as discovery meetings—in previous columns (see "The Path to Discovery," February 2009). Another key component is the investment planning meeting, at which you give clients or prospects a detailed investment plan that describes their needs and risk tolerance and provides benchmarks for tracking progress toward their goals. This plan is an important step in establishing you as an expert in the eyes of prospects and clients. And it will be the road map that will maximize their ability to achieve everything that is important in their financial lives.

You should prepare a formal investment plan for each of your clients—no exceptions. It is that important. However, understand that you need to create an investment plan, not a financial plan. While many advisors recognize the power of astute financial planning, most have found it difficult to execute it well or profitably. By positioning themselves as financial planners, they send a message to prospects that they are experts in all aspects of financial services—something that it is impossible to be.

By contrast, when you create an investment plan, you communicate a much different message: that you are highly focused on the one aspect of their finances that most affluent clients are most concerned about—preserving their wealth. As a wealth manager, you will address this critical task first. Only after the investment plan is in place will you turn to the other aspects of the client's financial situation (using a network of experts in those areas).

A well-designed investment plan serves a number of important purposes:

• Clarifies and solidifies client's goals. Your investment plan should document key areas of the investor's profile—from values and goals to interests, family member details, overview of assets, other advisors she works with and her preferred methods for working with advisors. The most critical area for investment decision-making concerns the client's financial goals. By putting these goals in writing, the investment plan ensures that both you and the client are clear about this critical area.
• Provides long-term discipline. A well-crafted plan ensures that rational analysis is the basis for all investment decisions. The investor is thus less likely to act on emotional responses to events—something we've all had to deal with repeatedly over the past year.
• Promotes clear communication. A good investment plan clarifies the issues that are most important to the client, the investment approach and the consultative process that will be used. This level of detail can prevent misunderstandings that might otherwise arise.
• Impresses the client. The investment plan demonstrates thoughtfulness in your approach to solving your clients' financial challenges. The document reflects your thorough preparation, systematic strategy and close attention to detail—all important to differentiating yourself from the competition and boosting your chances of winning new business from investors who have defected from their previous advisors.