Documenting Client Objectives

It is important to understand the difference between the client’s objectives and the strategies implemented to achieve those objectives. Objectives are tangible goals that the client wishes to achieve. Strategies are asset allocation mixes, generally between capital preservation, income, and growth investments.

We suggest that Brokers take enough time to fully appreciate and document client objectives. All objectives generally contain the following three characteristics, so you can document an objective by asking questions in terms of the objective’s characteristics:

• Timeline – when is the client looking to achieve the objective?
• Threshold – what is the minimum amount of dollars or return needed to consider the objective achieved?
• Purpose – what does the client want to do with the proceeds of the investment once the timeline is reached, assuming the threshold is met?

It is important to include the client’s objectives in the file as an additional benchmark for assessing suitability. Ensure that each transaction that you assess for suitability is consistent with one or more of the client’s objectives.