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Can Good Friends Morph Into Good Clients?

By Murray Coleman September 18, 2014

Friends can make fantastic clients — or they can be a real pain in the neck. On the one hand, a personal relationship may come with enough emotional baggage to complicate a professional one. On the other hand, it lets advisors leapfrog the trust-building process and streamline information-gathering.

“If you don’t at least consider working with people who already trust you on a personal level, you’re really going to miss a lot of good business opportunities,” says Sammy Azzouz, an advisor at Heritage Financial Services in Westwood, Mass., with $900 million in AUM.

Working with close friends requires many of the same skills as working with total strangers, experts say. These include being a great listener and knowing how to ask the right questions to find out what’s unique about each person’s financial situation. But advisors who have pitched their services to personal contacts say setting realistic expectations from the outset is even more important when dealing with friends and family.

Wait for the right time to offer a helping hand, suggests Azzouz. The most opportune moments he’s found are important life events, such as when someone has a child, changes jobs or gets married. In such cases, a congratulatory phone call or handwritten note can include an offer to answer any financial questions the event has triggered.

Azzouz also offers his assistance to friends who share financial worries during social occasions, from golf outings to dinner parties. “If you’re confident in your abilities, building a wall around your practice just doesn’t make a lot of sense,” he says.

Jim Betzig, a partner at Beirne Wealth Consulting in Milford, Conn., likes to enlist colleagues when his friends have financial concerns. For example, when one buddy recently revealed that he was rapidly depleting his savings, Betzig told him he had to rein in his spending. Then, to reinforce the message, he had a partner show his friend in graphic detail, via slide presentation, the dire consequences for his retirement plan if he didn’t mend his ways. “Taking a tag-team approach was a very powerful way to get through to him,” says Betzig, whose firm manages $1.9 billion. The friend might have discounted his advice as the overemotional response of a worried peer, but the colleague’s slide show reinforced his professional authority.

“Even though a lot of advisors are afraid that mixing business and pleasure can risk destroying a good relationship, we’ve found that if done right, it can actually strengthen those ties,” he says.

Jack Dugan

Still, there can be an embarrassment hurdle to clear before the advisor-client relationship gels. “A lot of people just don’t want to disclose their financial information to a guy they play tennis with all of the time,” says Jack Dugan, an advisor at Pure Financial Advisors in San Diego, with $1.1 billion. To help friends make the transition comfortably, he uses the same script with them during early meetings as he does with strangers, setting a professional tone and making it obvious that he’s putting on his advisor hat. And he warns against giving any kind of preferential treatment to clients who are friends. “A professional relationship can go downhill fast if you let friends talk you into cutting them a break, like reducing fees or skipping over important parts of the planning process,” says Dugan.

Friends can bring preconceptions into the client relationship that it’s the advisor’s job to correct. “Since a lot of my friends think all I do is manage money, I’ve found it’s critical to tell them how a financial planner really works” once they become prospects, says Dugan. And Mike Byrnes, a practice-management consultant in Kingston, Mass., recommends that advisors go over a complete list of their services.

“Knowing someone as a friend can definitely give you an edge in building a successful professional relationship,” says Byrnes. “But to take full advantage, advisors need to make crystal clear the true value of their complete set of services.”