There’s a difference between clients who become friends and friends who become clients. The people who started as clients first have already learned the rules of the road. Friends who become clients may have other ideas. Not all of these are dealbreakers, but you need to be firm.
1. Signing their spouse’s name to documents. The rationale is probably: “We do it all the time.” You’ve met people who sign the other’s name on checks as a matter of convenience. Now you are in the equation as their advisor.
Strategy: Remember “What happens in Vegas stays in Vegas”? What goes into your firm’s electronic storage stays there forever. If there ever was a divorce, you can imagine the spouse saying: “I never signed that.” If this led to refuting a trade or a transaction, you can see the consequences. Remind them a forged document stored forever is a big problem. Let’s not forget forgery is a crime.
2. Creative accounting on forms. What do you need to know all this stuff for? I’m just going to make up numbers. The client gets approved for options trading when they shouldn’t have been approved. Then something goes wrong. Perhaps they say: “You knew those numbers were bogus.”
Strategy: Use an expression my favorite postal clerk uses: “When you sign your name you are confirming everything you have written above your signature is true.” That’s should scare them straight.
3. C’mon, just tell me how much money she has. You don’t discuss your clients, but they can talk about you. One of your nosey friends insists you tell them the value of another client’s account. They feel you are being a “stick in the mud” and it’s no big deal.
Strategy: Ask if the roles were reversed and that client inquired about the value of their accounts, would they be OK with you telling her? Obviously, the answer will be a hard no.
4. I know a guy who knows a guy. As a financial advisor, you have a sixth sense when something isn’t right. That needs to be turned on when friends become clients. It’s possible they might be acting non inside information provided by a friend of a friend.
Strategy: People need to know the consequences of their actions. The agencies who investigate suspicious trading activity are pretty good at detecting deviations from patterns. If the “friend of a friend” is caught, they will likely give up the names of everyone they told.
5. Calling at all hours. You’ve been there. The phone rings late a night. It’s a friend who broke up with their partner. They are upset and needed to talk to someone. You are that lucky person. Now imagine stock market activity can also trigger those late night calls. This is actually an easy problem to solve. Although you want to avoid late night calls, your friend doesn’t want you bringing up business while you are unwinding and doing tequila shots.
Strategy: This worked for me. I would explain to friends who became clients that I would only call to talk business during business hours. (except emergencies). They aren’t bound by the same rule. If something is really bothering them, they can call anytime. This triggered the response: “No, we understand you deserve free time too. We will only call about business during business hours.”
6. Pop quiz portfolio reviews. We know the market doesn’t go up and down anymore. It soars and plunges, at least according to the TV news programs. A client might call you at home, agitated, wanting to know what they are worth or wondering if they should sell everything. Somehow, you are expected to have all this data at your fingertips.
Strategy: Actually, you do. Real time portfolio pricing is likely available remotely. You could get it instantly. They could access values online too. I find it’s good to have a series of portfolio reviews scheduled in advance. You (and they) want to see the big picture in a calm environment. You can remind them the next review is scheduled in ten days. If this is really important, you can move the review up to this Monday. If they insist on having this discussion now, you can accommodate their request, but you need a little time to gather and review the numbers. A series of choices, with dates in the near term, might calm them down enough to agree to review things soon, rather than immediately. It also conveys you are on top of things, while being accommodating to their request.
Friends can make great clients for many reasons, but you must manage the relationship professionally.