Almost everyone has fond memories of family holiday meals. For my family, they’re from Thanksgiving. As a child, I would race in and out of the kitchen to watch the enormous meal being prepared. It seemed like so much activity with very little progress. Then, about an hour before we were going to eat, everything came together.
As I got older, I realized that the preparation for the feast began weeks before the big day. My mother carefully crafted her shopping list, delineating all the items she needed. Her lists were so detailed and often multiple pages. I remember wondering why she needed a list. She knew how to make each dish; I didn’t understand why she didn’t just know what was required and then fill her shopping cart.
Now as an adult, I realize that it’s impossible to remember all of the details when we’re in the middle of trying to accomplish something. A shopping list is a necessary memory aid because there are limits on how much information we can retain.
Science confirms this. In a famous article published in 1956 in Psychological Review, George A. Miller reported on his research into the limits of human information retention: “The Magical Number Seven Experiment” explains that the human brain is limited as to how much it can retain. Miller’s research suggests that the number of objects an average person can hold in short-term memory is 7 ± 2, or between five and nine.[1]
You can easily validate his research by trying to recall two or three telephone numbers that you have never seen before. Unless you use specific memorization aids to train your brain to retrieve the information, your natural capacity will be overwhelmed and you may not be able to remember any of the numbers after a moment or two.
What Does This Have to Do with Being a Financial Advisor?
Like all neurological limitations, this constraint of data storage is a built-in feature of the human brain. As civilization advanced, humans learned to use external aids or tools to help us overcome our limitations. Fire keeps us warm, a bucket allows us to transport water, and words on paper help us remember. These tools enable people to accomplish things that would otherwise be beyond our limits.
Over the past 30 years, I have found that most financial advisors use some kind of to-do list to remember tasks that they must complete in order to service their clients. However, very few create checklists of all the critical issues of advice and portfolio management that they need to execute on behalf of their clients. The majority of financial advisors assume that they remember everything that the client needs from them.
When we think of an advisor managing 100–200 relationships, it becomes clear that she needs tools (client relationship-management software and files) to remember all aspects of each client’s financial life. These tools simply allow the advisor to remember what she and each client previously discussed.
What about the elements of a client’s financial life that the client doesn’t even know to ask about? How will the advisor remember all the details of planning and advice that haven’t even come up? The fact is that she can’t—because no one can.
In response to this significant challenge, the AllianceBernstein Advisor Institute has created a series of checklists to help advisors manage the complexity of their advising relationships. One powerful tool is the Client Relationship Year-End Checklist. This helps advisors prepare and execute more thorough and thoughtful annual reviews by expanding the advisor’s thinking to a larger frame of reference. It includes many issues that are often neglected when the complexities of life and business become overwhelming.
My mother wouldn’t have dreamed of going to the store to buy our Thanksgiving dinner without her shopping list. There was too much at stake to chance forgetting something important. In the same way, the Client Relationship Year-End Checklist ensures the highest quality of engagement during your annual review.
Upcoming Webcast: Secrets of Successful Advisors: The Effective Client Review
Register for our next practice management webcast on November 14th. Ken Haman will show you how to develop and execute an effective annual client review. You’ll also receive the AB Advisor Institute’s Client Relationship Year-End Checklist to use in your meetings.