Something always goes wrong in every relationship. Advisors worry about doing business with friends because if there is an issue they might end up losing a client in addition to losing a friend. The same risk exists with current clients. Things are going well until one day they are not. How do you weather the storm?
What Can Possibly Go Wrong?
If your client is 100% invested in three month US Treasury Bills, there isn’t much that can go wrong provided they don’t want their money before the maturity date. Once you get beyond plain vanilla investments is when problems can start to develop.
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The stock market is unpredictable. It can turn on a dime. It’s been said it rises like an escalator and falls like an elevator. World events just…happen. The market does not like uncertainty. Humans are great at hindsight. They blame you the advisor for not having anticipated this problem.
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The client didn’t understand the investment after all. You did your best to explain, but the client wasn’t listening. The investment has not performed as advertised and they blame you.
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The client did not understand what illiquid means. The client owns many investments, including some alternative investments like hedge funds or limited partnerships. They cannot be turned into cash overnight.
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The client had a big tax bill because of short term capital gains. Your client likes to trade stocks. They win some, they lose some. Their accountant has surprised them with a larger than expected tax bill.
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There is a dispute over fees or a trade the client wants reversed. There is money involved. If you agreed to their demand, it would cost your directly.
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The client has lost faith in you. Perhaps they met someone else. Maybe a relative is involved. They have created doubt about your motivation or second guessed your recommendations after the fact.
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Nothing seems to be going right. You know it’s possible phone messages can get lost. It only happens with this client. You know you will forget things you said you would do. It always happens with this client. Sometimes you recommend a stock and it tanks the next day. Guess who was the buyer?
19 Rules to Remember When Issues Develop
There are different kinds of client disputes. Some can be resolved easier than others. Some go to court. Here are 19 rules to remember:
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Write everything down. Whenever you have a conversation with a client, make notes in your client contact system. Hopefully noting ever goes wrong, yet you always have a record. If you offered a portfolio review three times and they always declined, that might be important.
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Get your manager involved early. The industry expression is “Have a problem, get a partner.” This might not be the first time this problem has arisen.
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Assume every conversation is being recorded. When relationships turn adversarial, you do not know if the client is recording what you say.
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Do not make side deals. This addresses something different from negotiating. You might be willing to make a concession to make the problem go away. This does not mean the problem is history. In your role as an advisor, you are an agent of the firm.
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Do not attempt to blame another employee. It can be tempting to “duck the bullet” and blame your assistant for putting an order in wrong or not following an instruction you (theoretically) gave. To the client, you are the firm. You are their point of contact.
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Do not blame the firm. As above, to the client, you are the firm. You profit personally because of the relationship. The firm’s policies are your policies too.
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Start to address the problem sooner rather than later. Sometimes we hope the problem will go away. Maybe the client won’t notice it. Maybe the market will bail me out. If there is a problem, get on top of it. Don’t brush your client off.
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Be responsive. Do not hide. If you stop taking the client’s calls or ask your assistant to talk with the client instead, the client will only get upset.
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Put yourself in their shoes. It is easy to get settled into our own positions. We convince ourselves we are right and the client is being unreasonable. Find some quiet time and think of the situation from the client’s point of view. Why are they upset? What would be a reasonable solution.
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Meet in person if possible. Phone calls can be abstract. Communication by text and e-mail can be even worse. If possible, meet at a neutral location. When you are face to face, you can look them in the eyes. Your sincerity comes through better.
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Gather the parties on the account. Who is upset? Is it the client or their spouse, who is listed as the joint tenant on the account? If you meet with one partner, you might think you have settled the issue with them, but now they must sell your solution to their partner. If they are both present, you might be able to win one of them around, which is a bonus.
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Highlight the longevity of the relationship. How long have you worked together? What difficult market situations have you weathered? Has your advice worked out before? The strength of the relationship can work in your favor.
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Let them do all the talking they want. They are angry. They want to sound off. Let them talk. This doesn’t need to be a dialog at this point. You might want to answer points or make corrections. Ideally this is done after they have gotten everything off their chest. Now you can express your position. They may simply have wanted to let off steam, especially if the problem deals with performance.
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There are three sides to every story. Years ago, a retired corporate manager explained there are three sides to a story. (You thought there were two!) There is your side, the other party’s side and the actual facts. Both sides might be at extremes. The facts might bring them together.
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Time heals all (or most) wounds. Sometimes this can be true when market performance is involved. The client was upset when they got last month’s statement. You set up a meeting a week or so later with both parties on the account. It took time because their vacation got in the way. By the time you meet, the market might have rebounded. Maybe the issue isn’t as serious as it first seemed.
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Find common ground. Sometimes you need to agree on smaller issues before you agree on the bigger issues.
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Be prepared to negotiate. Your client relationships have value. They have produced revenue in the past. Happy clients produce revenue into the future. “Its my way or the highway” isn’t going to save the relationship. The firm likely has guidelines what you can do. Perhaps discounting is involved.
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Don’t do anything illegal. Do not offer to make the client whole with money out of your own pocket. This can get you into even deeper trouble. Do not sign another person’s name to documents or do trades without permission of the account holder. What started as a dispute over a simple issue could escalate into a criminal act. You are an agent of your firm.
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What can we do to move forward? If you meet with your client in a neutral location, let them do the talking, even if it includes yelling and you maintain your composure, you have done something heroic. A New England advisor, when in a similar situation, has utilized the expression, “What can we do to move forward?” The client should realize (by now) they have treated you badly. It is difficult for them to say: “No, we cannot move forward.” You may have saved the relationship.
Most people will go to great lengths to avoid conflict. When you have an issue with a client, you need to address it as soon as possible. If not, in most cases, the problem will only get bigger.
Related: How To Establish Credibility in the Cultural Community