The importance of system

I've written many posts about checklists, but realize that I have neglected context for financial advisors. The issue was highlighted in a conversation I had with Andy Gluck.  “So, these checklists” he asked, “are they like work flow?” Well, yes, used one way.  It helped me realize I have been discussing the tool without discussing its place in the workshop.

Checklists are a component of a system, and the system is more important than the checklist. Each function a financial advisor determines is important to his practice needs a process. The process could be a checklist, or it could be more narrative and detailed. The critical idea is that each activity of importance to the practice be a documented process. I envision checklists as tools for implementing those processes, but your practice manual could simply be a collection of those checklists. What role they play is up to the individual practitioner.

A best practice approach recalls my days as the chief compliance officer. An investment firm's compliance system (whether broker/dealer or investment advisor) requires four P's for each regulation -- policy, person, process, and proof.

The policy describes how to address a particular situation. The situation in a compliance system is to satisfy a rule, but it doesn't have to necessarily be a problem. An upcoming client appointment would be a situation that needs preparation.

The person is the staff member who is responsible for carrying out that particular process. The process is the collection of tasks to implement the policy. The proof is the record that the process was completed. The proof could be checkmarks or initials on a paper form, an electronic signature or stamp in software, or a dated report.

The point is that all these must be coordinated and diligently executed to ensure the practice consistently produces the desired outcome.

Each element in the operation of a financial advisor’s practice should somehow have these four Ps documented and used.  The system can include a comprehensive explanation with rationale and steps, or it can simply be the checklist for carrying out the tasks. The form is less important than having a solid system, testing it and using it.

Without a system, too much is left to chance. The result -- what's done and how it's done – are almost guaranteed to be inconsistent. You hope things will be done the way you intend.  And, as the other members in my CEO learning group are fond of saying, hope is not a strategy. You would not be able to assure staff or clients of what to expect, and you cannot assure that the hoped-for outcome will be realized.

So, yes, Andy, work flow is a kind of checklist. It can be paper or electronic, comprehensive or specialized. As long as they are part of a system, you can be confident of producing consistent results. A well thought out, tested and document process, diligently and consistently implemented, is a hallmark of a successful financial advisor’s practice.



Financial Advisor Checklist for Client Meetings

One of the best situations, in my view, to benefit from the use of a checklist is the client meeting.  With them, you can help assure that you and your staff have properly prepared, that you discuss all the necessary issues, and that all the necessary follow up is done.

I will post some examples of checklists you can use, and will create a page where you can post some of your own so that you can get some ideas or suggestions for improvement.  In the meantime, Horsesmouth just featured an article last week about this very topic, so I wanted to provide you the reference.

You can find the article here.  It is in the subscriber area, so if you are not already a member, you can sign up for a free trial.  If you have not already checked it out, I recommend it.  There are articles every day with valuable ideas and advice.

The Right Length for a Financial Checklist

On May 13th, I wrote a post on the principals of a good checklist.  On that list was the guideline of keeping checklists to between five and nine items.  

As I work with financial advisors on developing checklists and testing them out, I realize that I was wrong about that.  In researching where I found that principal, I saw the original reference to it in the Checklist Manifesto.  The number came from Daniel Boorman of Boeing, and the context was emergencies in cockpits during flight.  In an emergency, Boorman finds it is a good idea to limit that kind of list to what can be held in human working memory, hence the number.

Looking up other references to the checklists in the book, I found later that the surgical checklist that Gawande developed for the World Health Organization was 19 steps long. I realized some checklists for more complex, larger projects would be vastly longer than five to nine items.  

Here is the principal: The checklist should not slow the process down, and the checklist for any one process should be kept to one page.  When you are developing checklists for your practice, the length should be determined by the function and the frequency. When utilizing a checklist during a client appointment, or some other occasion where time is a premium, or in a process you utilize frequently, the list may be short.  

Other times, you may have a checklist for a situation that happens only rarely, and when it is not urgent.  I have been talking with Dr. Katie Votava about submitting a post on what to consider when the client has certain health changes, for example.  That is a predictable but infrequent occurrence.  The list of what to consider or review may be much longer because you do not address it very often.  And even if the list takes some time to move through, it may save you a lot of time in limiting how long the topic takes to research (or the time it would take to correct a mistake because you missed something!).

When it comes to financial advisor practice management, then, the principle is not to aim for a specific length checklist, but to tailor it to the time commitment of the task at hand.  If used during a client meeeting, it should be brief.  To maintain the quality of a developing client recommendation or an investment selection decision, it may be much longer.  The objective is to make sure you cover all the important steps without slowing the process down.   As long as it saves time (regardless of its length), it will be an asset and not an obstacle



Checklists for Professional Financial Advisors

Let's clarify something.  Not all checklists are created equal.  Some are designed for people who are new to a topic or are revisiting a topic after an absence.  Planning your trip to Disney, choosing the right golf club, remodeling your kitchen -- all of these kinds of checklists are extensive and designed to prompt the user to look into things they may not know about or may have lost touch with.

The kinds of checklists I write about in this column are for financial advisors to use when they're still fluent and experts at a topic.  Some checklists may be for advisors new to a topic, like when you're selecting a new client management system or for year-end tax planning, which may include new changes to the tax code.  While I will address that kind occasionally, those aren't what I am primarily concerned with.

The checklists I advocate most of the time are intended to be used routinely.  They are intended to be used each time a particular process is conducted.  And I assume that process is probably done pretty often.  Examples might include conducting a client review, preparing a financial plan, selecting a new security to recommend.

My intention is to prompt you to confirm each critical step in the process that can easily be overlooked.  The objective is to enable you to empty your minds from tracking things and free it to engage in expert and creative processes.

There is an important difference between these categories of checklists.  Checklists for professionals must not slow the process down.  It must, therefore, be brief, and can be expressed in industry jargon or short-hand.  Checklists for professionals make the assumption that the user is an expert, so they focus only on critical steps that can easily be forgotten.  Checklists for non-professionals, or for non-routine use, may list everything involved in preparing for something or working through a process.

Financial advisors may use both in their practices.  In preparing for a client meeting, for example, you may have a checklist for yourself that includes

• Review draft reports
• Check download status
• Check asset classifications
• Submit for printing

Simple enough; maybe even so simple it seems unnecessary.  But let me tell you something about my own experience.  When I report to client, I use Albridge Wealth Reporting, and it takes the feed of outside accounts from Cash Edge.  Cash Edge can easily lose a feed from a client account.  If the client changes the password to his outside account, or if the website pops up a promotion when a client logs in, or if they change their interface to look different, or many other possibilities, Cash Edge doesn't get what it expects to see when it logs in, and it stops downloading.  If you log into the Cash Edge website, you will see an alert, in the form of a little exclamation point, along with a note of how many days it has been since it last successfully downloaded data.

When Cash Edge  passes the information through the Albridge, however, there is no flag.  There is no way of telling whether the information about outside accounts is current - unless you log into Cash Edge and check!  I cannot tell you how many times, in the rush to prepare for appointments, we missed that step, and presented reports to the client containing outdated information.

There may be a checklist for after the meeting which may include:

• List action items
• Delegate tasks
• Dictate a follow-up letter
• Schedule the next appointment
• All important steps that can easily be overlooked.

On the other hand, there may be a checklist for the client as well.  This list would be more oriented for the non-professional, and may be more comprehensive and written in plain English.  It may include, for example:

¨      Please bring the following to our upcoming meeting -

• Your most recent benefits statement from work
• Most current bank statements
• Most current retirement plan statements

¨      If any of the following have changed, please bring them as well -

• Your current health insurance explanation of benefits
• Your current Homeowner's policy
• And so on…

It would be a long list because the client has little understanding of which documents are going to be important for the advisor's consideration.  It would be long, comprising everything that may be necessary, unlike the checklist for the advisor or her staff which would be short, in shorthand, and limited to critical items.

When creating a checklist for use in your practice, then, focus on those particular elements that an expert can overlook.  Express it briefly and in the language you use around the office.  Make them quick and easy to use.  Write the lists for professionals, and it will easier to get them adopted, systematically used, and improving the consistency of your practice.

For the financial advisor, checklists aren’t instructions

Lots of checklists I see are actually instructions.  There is an important difference -- a well crafted checklist for regular use in a financial advisor's practice is designed for the professional, a practitioner who may have decades of experience.  Users of these lists know how to do the task at hand; the purpose of the checklist is to confirm that nothing has been forgotten, no critical steps omitted.

I read a blog post recently praising checklists for financial advisors.  It said "If you can read, you can do it."  I can't see a professional sticking with a list like that for very long.

Can you imagine a checklist named "Prepare a retirement plan" designed for anyone who can read?  It would be pages long, with conditional tasks and branches.  A list for any complicated task like that would take way too long to complete or could actually be insulting to the professional. Either way, it would soon be dropped and forgotten, and that wouldn't accomplish any practice management objectives.

A checklist should be brief.  Brevity requires that it be written in the language of the financial advisor.  Also, there is no need to include items the professional would not likely forget.  A checklist for retirement planning, for example, would probably not include the projected or desired retirement age.  Retirement age is an important factor in the plan, but no advisor who has done planning for any length of time would forget to ask.

While compensating for the shortcomings of memory, the checklist will provide for a user to express their professional competencies.  This idea is in conflict with the "anyone who can read" standard.  Approached this way, a well designed checklist for investment management or financial planning may be incomprehensible to someone who is not an investment adviser.  "Review SAI" or "confirm Social Security inflation assumption" could be a useful memory jog for the financial advisor and incomprehensible to a non-professional.

When checklists designing for practice management, keep in mind that they should not slow the process down. They must focus on critical steps that are easy to forget, rather than all potential steps.  And they can be written in professional jargon and short hand.  Created with these principles, checklists are valuable tools an experienced financial advisor can appreciate and enjoy.