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Remember the three martini lunch? Probably not. Tax law changes phased out this 1960’s expense account perk. It still featured in episodes of Mad Men. Taking a client to lunch has many advantages.
1. Clients see this as a benefit. In Louisiana, they call “a little something extra” lagniappe. It’s given to customers as a form of thank you. Taking your client out to lunch is a way of letting them know you appreciate their loyalty and their business.
2. FINRA rules. Advisors know FINRA has rules stipulating how much an advisor can spend on annual gifts for individual clients. Taking them to lunch occasionally counts as business entertainment, not a gift. (1) Giving them a voucher is a different story.
3. Strengthen the relationship. When you sit across from someone and chat about many subjects, you learn about their interests. You get to know each other as individuals. You identify shared interests.
4. Referrals. Here’s a clever idea I heard in the field. Do you have a client retiring soon? Invite them out for a celebratory lunch. Ask them to bring colleagues from the office who are also retiring soon. Ask your client what they will do on the first day in retirement. The guests likely need the same advice as you gave your client. Your client talks you up.
5. The venue sets the tone. If you pick a swanky restaurant (with a great business lunch deal) your client feels “this is where my advisor feels I belong.” They also see you as fitting in with the luxurious surroundings. They conclude you are a HNW individual (or rub shoulders with them.)
6. See and be seen. You respect client confidentiality. You do not talk about your clients. If you dine in a restaurant that draws a high powered clientele, some of those people might know your client (and vice versa). They stop by the table and say hello. Let everyone draw their own conclusions.
7. Incentive for face to face portfolio review. Your client trusts you. They do not see the need for an annual meeting. You want to get them into the office. Suggesting you meet first, then have lunch together gives them an incentive to come into the city.
8. Position new ideas. You presented new investment ideas to your client during their portfolio review. They were undecided. You have lunch together and bring up those investment ideas again. They might be more receptive.
9. Neutral ground. You and your client have a problem. They are unhappy. You feel they might be considering moving their account. Neither their house or your office is neutral ground. Meeting over lunch at a restaurant is neutral ground. The conversation might go better now. I met an advisor who would say: “Things haven’t been good lately” then stop talking and listened.
10. Executive dining room. In my later years in production, our office was in the firm’s HQ building. There was an executive dining room on a top floor! Our retail branch office had an account! I understood you could dine with a client, sign the check along with the billing code and settle up back in our office. Clients were impreressed!
There are many benefits to inviting your client out to lunch. You can likely think of several more!
Related: The Bartender: An Essential Friend for a Financial Advisor
(1) https://www.finra.org/rules-guidance/key-topics/gifts-gratuities-and-non-cash-compensation