Implement Boundaries and Structure with Volatile Clients
This time we hear from Matthew Murawski, financial advisor at Goodstein Wealth Management in Encino, Calif. He recalls an experience that taught him to set clear boundaries and use written agreements to prevent couples from continuing to change their minds and go back on their word.
I advise a married couple who are both in their mid-fifties and about five years away from retirement. To put it lightly, they strongly disagree on how to invest their shared money. The husband is obsessed with trying to predict the market and sell at the “right” time, while the wife prefers long-term investing and thinks they can afford to hang back a bit since they still have several years before they retire. I have worked with these clients since 2014, and the relationship has been a tough one to navigate. However, monetarily, they are my largest client and have more than $3 million invested with me.
I have trading authorization in my business, but I like to notify clients, out of courtesy, before I make any moves with their money. I want them to know beforehand what we’re doing so there will be no surprises. Normally, there are no issues with this strategy; clients trust my judgment as their advisor. The husband in this particular situation, however, questioned everything I wanted to do and reacted strongly to any change in the market. It was also apparent that he and his wife didn’t respect or trust each other’s opinions.
At the beginning of this year, the husband called me once every few days — sometimes as early as 6:30am — wanting to sell. On those same days, I would receive calls from his wife, asking that I keep the money invested. Each time, I calmly talked them through the plan we had in place. I cited historical data about market fluctuations, attempting to get the three of us on the same page. Each time, we would agree on keeping the money invested, as it was the logical thing to do at the time, and the husband would call later and apologize for his brash behavior. A few days would go by and I would get another call from him: He had completely changed his mind — again — and wanted to talk about a new strategy.
Before this client, I had never encountered a situation in which an oral agreement would not suffice for making day-to-day decisions. I feared what would happen to my book of business if I lost this large client, but the volatility was wearing me out, and I had come to my breaking point. I thought that the best shot I had at making this work was to get together with the clients and write down a permanent plan. When you put ideas to paper, it brings them to life—and we couldn’t sustain the relationship on the he-said, she-said basis anymore. It needed to be documented.
I asked the clients to come into my office for a mandatory meeting as soon as possible. I set my boundaries up front: The current relationship was not working, and the only way I would continue as their advisor is if we came to an agreement today and signed a document that would guide our procedure moving forward.
We began negotiations for the amount they were going to sell — the husband started around $400,000 and the wife started at zero. After a while, they agreed to sell $115,000 and keep the rest invested. If the Dow dipped below 23,000, they would invest this money again, no questions asked. Otherwise, the $115,000 would remain as cash. I drafted the document accordingly, the three of us signed it, and I gave them each a separate copy. We walked away with clear expectations and a solid plan.
It has been a couple months since they signed this agreement and our relationship has improved immensely. There have been no more sudden changes of heart, and no more early morning post-news phone calls. In fact, for the first few weeks after this meeting, I did not hear from them at all — except for a gift basket and a thank-you card, the first I’d received from them in our four-year relationship. This honest discussion and written agreement gave me peace of mind, provided them structure to fall back on if they were feeling uncertain at times, and allowed all of us to restore our individual integrity, both personally and professionally.