When you’re dealing with challenging clients ...
Happy clients are the bedrock of every advice practice but not every client is easy to handle.
Interpersonal skills and patience matter as much as market savvy and a head for figures when you’re trying to deal with challenging clients. Here are our top tips for 2017, written by your peers.
When your client is in crisis …
… be sure to take it easy, says Pedro Silva of Provo Financial Services.
When people are going through a major transition Silva has learned that what they need most is listening and support, not problem solving.
He remembers meeting the widow of a long-term client who had recently died. During that first meeting Silva spoke about important next steps to get her finances in order, but still stricken with grief, the widow was not ready to move forward, even though she knew the steps were necessary.
“Our timeframe and our to-do list were completely different from hers,” he says, and a few months later she took her accounts to another firm.
Silva realized he needed to tweak his service. When the widow had needed him the most he'd been offering solutions that didn’t make sense to her.
Silva retooled his firm’s process for working with clients who'd lost their spouse so that they could feel confident they were addressing pertinent financial issues – on a timeline that worked for them.
They developed a process to help surviving spouses transition from their initial grief to a place where they're comfortable making decisions in a thoughtful and proactive way.
They created a to-do list that addresses what the surviving partner will experience in their first year after their spouse's death.
“Our role is to make sure these clients don’t make bad financial decisions during that time. We want to be part of the solution, not another problem for them,” says Silva.
When a client just won’t change …
… find a way to work with them as they are, not as you wish they would be, encourages Jenna Biancavilla of Pearl Capital Management.
She remembers a client who described to her his “horrible financial situation” during their first meeting. He and his wife were using about half of his monthly income to pay off debts, including $30,000 on credit cards.
She collaborated closely on a plan to decrease the clients' overall debt and pay off the credit cards.
“I was thrilled to hear that they implemented the plan,” says Biancavilla, but a year later the credit card debt was back to up to $30,000.
Biancavilla was completely surprised – why didn’t their behavior change? And after another debt reorganization, the same thing happened twelve months later.
After a very candid conversation, Biancavilla realized her clients simply felt comfortable carrying the $30,000. Though it may sound counterintuitive, they believed it compelled them to be more financially responsible. When they didn’t have any debt, they felt great about their financial situation and would go on vacation or buy a new car with their credit.
Biancavilla realized that rather than trying to fundamentally transform how this couple handled money, she needed to learn how to be a good advisor to clients while understanding that some of them weren’t likely to ever change.
Instead of watching them go up and down the roller coaster of accumulating debt, paying it off and accumulating it again, it was better to have them carry their $30,000 in debt at the lowest rate possible.
“I always try to help my clients have a better relationship with money and change their negative financial behaviors, but there are going to be clients who are just not willing to change,” says Biancavilla. “For these clients, I need to change my advice and gear our planning toward addressing their specific behaviors — finding a way to work with them as they are, not as I wish they would be.”
Whatever you do, keep your principles …
… even if you lose the clients, warns Michael McLaughlin of Capital One Investing, who says one of the most important things an advisor can do is slow their clients down.
Sometimes clients want to jump right into market recommendations and make instant decisions about where to put their money. They’re so focused on immediate returns they can’t focus on long-term goals. Sometimes they even refuse to focus on those goals. This is rare, and it may never happen to you. But if it does, McLaughlin says you may need to let that prospect go.
The lesson came home to him when one client began asking over and over about investing to maximize short-term returns.
McLaughlin tried to get him to put those questions aside and consider long-term goals but he didn’t take those conversations seriously.
“Finally I realized that even if he let me develop a long-term plan, he probably wouldn’t take it seriously. He wouldn’t own it,” says McLaughlin. “At that point, I decided it was best for both of us if we parted ways.”
McLaughlin says that was hard to do. Nobody likes to lose a client, but “I realized I wasn’t doing him — or me — any favors by hanging on to his business."
McLaughlin developed a basic plan for new clients. He never leads with recommendations. Instead he leads with a plan centering on the client’s investment goals, risk tolerance and goals for the future. After defining those goals together they develop a plan to achieve them.
This process encourages clients to be goal-driven and not performance-driven, and reminds them that sometimes long-term goals do not align with short-term performance.
If he senses they’re not willing to develop or stick to the plan, he considers separating from that client.
“This does not happen often, but I think it’s important for advisors to remember to stick to their principles — planning over performance,” McLaughlin says. “If you do, you will have long-run success with your clients.”
In the end, don’t despair …
… you may not have to fire that nasty client after all, says Patrick Renn, president of Renn Wealth Management Group.
Considering saying goodbye to a client is often easier to talk about than it is to do. But Renn knows from experience it can make a lot of sense when you have a client that is simply a bad fit for your firm.
Once he was approached by a high-profile local businessman about working with him.
“This guy was a very hard-charging executive – as Type A as they come,” Renn says. He worked all the time – and I do mean all the time.”
He also brought that same 24/7 intensity to his relationship with Renn’s firm. After a year of good work for the client, Renn’s staff started to complain. He was calling and contacting staff much more frequently than other clients, and was gruff and demanding.
Part of the issue was he had multiple advisors and was constantly trying to keep up with everyone. The complaints kept coming.
Renn eventually told the client nicely but directly that his manner was off-putting to staff.
“I said we obviously weren’t a good match and needed to part ways.”
To Renn’s surprise the client admitted he could be unpleasant and he asked for a second chance.
To Renn’s surprise the client backed off on the number of calls and was always pleasant when he checked in.
“He has become a model client and we are glad to have him.”
Since then Renn has come to realize clients need advisors more than advisors need them.
“I am more careful about who I welcome to our business. I have also turned down business based on a bad feeling or my reading of how a client may behave.”