This again ties into what they need and want to achieve, and we bring the other two elements in here too. What risk are they financially and emotionally able to take, and what risk are they willing to take?

So when documenting your risk discussions you need to document these things: can the client afford to take risk (capacity for loss); do they have the knowledge and experience to be exposed to risk; and are they willing to be invested? This then leads to what level of risk you recommend.

But let us take a step back to needs and objectives. If you have not detailed these well, then your risk profiling will fall down — not only because of the need to take risk mentioned above, but because of how much risk you have recommended they take.

Take a client where your objective simply stated “client wants to beat inflation”. Over the longer term, the client is expected to beat inflation in a relatively low-risk portfolio. So if you use that objective, but recommend a medium-risk portfolio, for example, it is immediately unsuitable because the client does not need that level of risk.

If, however, you expand on your objective to say “client wants to ensure that their money not only keeps up with inflation, but has the opportunity to grow as much as possible within a risk level that the client is comfortable with, because they’d like to leave as big a legacy as possible”, then suddenly we have a suitable reason for a portfolio that is medium risk in this example.

Using the fundamentals

We could go into more and more detail around needs, objectives, risk profiling and how this all ties into wider advice areas such as retirement planning and replacement business, but we would need a whole day.

These fundamentals will set you on the right track to improving your client files, and evidencing why your advice is good suitable advice for your client.

The problem many planners face is that most of the time the advice provided is good advice, but the poor documentation and note keeping means it can be hard to evidence that it is good.

Here are the final tips to take away and think about:

• Make sure you document what your client needs, and back it up with income and expenditure detail, and sense check it.
• When it comes to objectives, make sure you ask and document the “what, why and how much?” It is hard to prise these details from clients, but if you are a planner then that is a skill you need to have.
• And lastly, document your discussions around risk. It is not good enough to simply say “discussed risk and agreed medium level”. That is woefully inadequate. Document your discussions around the need to take risk, can they afford to take risk, what experience and knowledge do they have, and how willing are they to invest?

There are a load more tips to give on good client files, but these fundamentals need to be nailed before thinking about anything else. If these are not nailed, everything else falls apart.

Carla Langley is owner and founder of Langley Consultancy