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Everyone has heard the expression “pro bono” in TV dramas. This is usually associated with cases lawyers undertake without the expectation of getting paid. It is their way of giving back to the community. Doctors and accountants do it too. Why should financial advisors help clients if they are not getting paid?
When talking about financial advice, this is not doing stock trades at no cost. This involves providing advice towards solving a problem where the advisor is nor ringing the cash register. There are several reasons why this is a good idea.
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Referrals. The client needs a lawyer or accounting advice. This is an area where you are not qualified. Your firm might specifically prohibit you providing this guidance. The simple reason is you are not licensed. You suggest they consult an attorney or accountant. You might provide three business cards for people you would recommend.
Benefit: There are many. The most direct one is the professional who gets their business might send you referrals in return.
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Reducing interest in credit card debt. Your client carries balances from one month to the next. They might be paying about 24% as an annual interest rate. (APY) They have no plans to pay it down anytime soon. You suggest they shop around, see who offers a lower APY as an introductory rate on balance transfers. What is their APY afterwards?
Benefit: The financial planning you provide should include some budgeting advice. This fits into this area.
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Advising them to keep an emergency fund. This is cash they do not invest. This cash is ideally earning interest and is held in a money fund, short term CDs or Treasury Bills. You are not investing this cash, thereby missing out on management fees. If their job security is unstable or there might be emergency expenses on the horizon, they have access to cash without needing to sell stock in a volatile market.
Benefit: Your client knows you are putting their interests above your own.
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You advise their relative who is below your client threshold. They have a family member who is hopeless with money. They spend everything they take in. Various family members lend them money. Your client asks you to talk with them. You give basic financial planning, budgeting and debt management advice.
Benefit: Your client sees you are doing them a favor. They feel they need to do something for you in return. Relatives are impressed.
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You help their child find a job. This might be for a summer job. It might be when they graduate from college. They assume you have connections. You see risks here with no upside. This might be a simple career counseling conversation on your part. Your firm likely has seen this many times before. They have procedures to follow. You will get them started on the journey, having advised the necessary individuals this is the child of a client. It might not work out, but they should get good treatment.
Benefit: You helped a client in a serious area. They will not forget.
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You donate your skills as a nonprofit board member. Someone once explained nonprofits are eager to get a CPA on their board because they hope they get their taxes done for free! Financial advisors are unlikely to find themselves in this position. FINRA has strict rules. Your firm might prohibit you serve in a role where you advise on investments that might include any investments not offered by your firm. Your manager needs to approve this outside activity. They likely will not.
Benefit: You wish you could help. You spoke to Compliance and your manager. They said no. You made the effort. They should understand.
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You consoled them when they lost a family member. Here you are serving as a good friend. You are sitting with them, listening to them. You are helping them put things into perspective. You are talking about options for the future. Business is not discussed. You are strengthening the bond between the two of you. It goes beyond business.
Benefit: It will be a lot tougher for a competitor to persuade them to change firms.
Your client will encounter problems in life. They will not always know where to tuen for an answer. You might be in a position to help in your professional capacity, but they have not seen you in that role. As a financial advisor, when your client faces an issue, you want to be the first person they look to for advice.