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Worldwide the issue of "Best Practices" where clients are served consistently and effectively is of great concern. Going forward, Planipedia will feature a new Best Practices topic monthly. This month's focus is The Engagement Process.

The Engagement Process

It is doubtful that there is any single activity that an advisor can make part of their modus operandi that would have a more positive impact than ensuring that there is a robust written engagement agreement in place for every client. (Note: the terms engagement agreement and letter of engagement are synonymous.)

Even advisors who have used engagement agreements properly for only a short period of time report that the benefits quickly become obvious. For the advisor who has functioned primarily with a “product transaction” focus that responded to a client’s individual needs, the use of an engagement agreement might, at first, seem unnecessary or more simply put – a waste of time. They may be of the view that defining the terms of a client engagement and committing them to writing is about consumerism or complying with a professional financial advisors’ practice standard. But, of course, it is much more than that. The proper use of engagement agreements is to provide a better service to clients and a sure-fire way to dramatically improve the efficiency of an advisor’s practice, which will result in enhanced net income. This effectively becomes the deal before the deal.

The rationale and explanation are simple and can be illustrated with a short story....

Check out the complete Table of Contents for Best Practices.