During a recent course I attended, the room was asked to write down the first three questions they would ask potential clients/customers to gain the greatest insight in to them.
Everyone went about quietly thinking and scribbling down ideas. I didn’t. I knew mine as I ask them to every potential client I meet straight away.
They’re not fancy questions, nor would most people (or accountants) consider them insightful. But as a means of understanding the ecosystem the client works and lives within, they give me so much information.
The three questions are:
- How old are you?
- Are you married?
- Do you have any children?
Most people ask these questions in casual conversation. When I ask them however, it’s a loaded question because the answers will hugely influence how I work with the client and what advice I give them. Here’s why.
How Old Are You?
Generally, I have a ballpark figure in my head for each potential clients age. However, I’m sure we’ve all offended or complimented people in equal measure by guessing this number. So, I tend to just ask.
If clients are in their 20’s or 30’s the following need consideration:
- Is their business at a stage of profitability that they can start to provide for retirement?
- Do they still have any student loans outstanding?
- What are their plans for either retirement (yes, this needs considered in your 20’s and 30’s) or exiting their business? If they plan an exit, how? And what will they do after that?
- Have they multiple income streams that can take dependancy off their business in case of a doomsday scenario?
- Do they own their own home yet? Are they planning to build/buy? Consider Help To Buy ISA’s and LISA’s (must sign up to LISA’s before the age of 40)
If clients are 50 or over:
- When do they plan to retire?
- Have they been making pension contributions? Have these been sufficient to retire when they plan to?
- Have they any breaks in National Insurance contributions that might affect how much State Pension they receive?
- Have they any other income generating investments?
- If they are already 65, they are entitled to an increase Personal Allowance
- Have they prepared a will? What does it say?
- Have they started to dispose of their estate during their lifetime? Can they start to do this, so as to bring much of their estate outside Inheritance Tax (IHT)?
- How healthy are they? Might they (or their spouse) need to move in to a care home at some stage in the future? Ownership of assets can greatly affect how much they need to contribute to this cost.
Clients between 40 and 50 have a lot of the same consideration – pensions, retirement planning, diversifying income & investments, and estate planning (or at least giving consideration to estate planning).
Are You Married?
Again, a quick glance at the left hand might give this one away but best to ask nonetheless. If they are indeed married, the following tend to go through my head:
- Does their spouse work? If not, can they work within business to extract a wage and use personal allowance?
- Are there any unused personal allowances that can be part transferred?
- If the business is a limited company, can the spouse have shares transferred to aid tax efficient cash extraction?
- Are combined IHT Nil-Rate Bands sufficient to shelter the home house plus any other assets?
- What’s in their will? Do all assets/business interests transfer to the spouse? Is this a good thing?
- Do they own a home? How much is left on their mortgage? Is it practical to pay off early? Is there equity available in the property if they needed to refinance?
Do You Have Children?
Having kids is possibly the most important of these questions as it has huge consequences for tax and business planning:
- What age are the children? If they are school leavers, the parents are likely going to need access to cash if they are going to college
- Are any of the children involved in the business? Are they part of the succession plan of the business? If not, what is the succession plan?
- Is it feasible to make children employees or shareholders in the business to aid tax efficient cash extraction?
- Are the parents entitled to/claiming tax credits?
- Are the parents paying registered childminders? If so, the new Tax Free Childcare scheme will be of interest to them
- Are the children provided for tax efficiently in the will? Have the parents explored trusts as an options of providing for their children?
- Have Junior ISA’s been set up for the children?
- Have Child Trust Funds been set up for the children?
- Are the parents planning any more children? Are they entitled to Statutory Maternity/Paternity Pay or Maternity Allowance? Is the business paying any SMP?
Getting Personal
When I explained to the course trainer that these were my three questions, she was somewhat surprised. I think she was worried I might offend some people by asking these personal questions right off the bat. I’ve yet to come across this.
Some might say I’d be better off asking about the business, but for the most part if a client is a hairdresser, lawyer, coffee shop, restaurant, IT consultant etc, the business model will (generally) be quite similar to every other business of that trade.
Whilst I gain a huge amount of insight in to the client by asking these questions and put myself in a better position to offer the best advise possible, there’s something more important that I gain out of this line of questioning.
I get to know my client.
Not what their business is, not how much money they make, not how healthy or otherwise their finances are. I get to know the person and what’s important to them. I connect with them on a human level. Aside from the professional insight, I am genuinely interested in them and their lives. Oftentimes when advising on someones business, you’re advising on the means by which they provide for themselves and their family. It’s a deeply important and personal thing. So whilst taxes and finances are important to both me and the client, their lives, family and happiness are far more important.
To both of us.
