Sooner or later, investment advisors are going to see their advice rejected, and they’ll need an action plan to deal with the issue.
In his 50 years of money management experience as a financial advisor, Jack Hillis of Hillis Financial Services said, “It’s inevitable that some clients will question my guidance.”
The conversation always seems begins with ‘I just read this in the news’,” Hillis said. “This immediately raises a red flag, as the media is often the primary catalyst to bad investment decisions. A company reports strong earnings, or news reports rave about a profit opportunity and investors want to get in on the action.”
When his clients advocate making investment decisions based on the headlines, Hillis presents proof from the past that demonstrates why this it’s a poor decision. This often can actually improve an advisor/client relationship, he said.
“If they opt to make the investment after I’ve provided my guidance and presented past examples as to why they should refrain, it is usually a one-time occurrence,” Hillis said. “In most cases, the investment does not provide the returns expected. This often strengthens the relationship between the client and myself – after they’ve made a poor decision that goes south, they place full trust in my decisions.”
Anticipate Their Questions
Getting ahead of a client who ignores an advisor’s advice is a great way to quell it before it develops in a serious problem.
Jake Serfas, lead financial strategist at OWRS in Baltimore, Md. does just that.
“In our practice, we offer a free consultation to our prospective clients to sit down with us and get their financial questions answered,” Serfas said “We can tell very quickly what their objectives are and what they want.”
Potential clients aren’t the only ones asking the tough questions. Michael Tanney, co-founder and managing director of Wanderlust Wealth Management says he’s interviewing them, just as much as they are questioning him.
For Tanney, clients who understand that all successful long-term investing is goal-oriented and therefore discipline-driven are the ones who tend to pass his interviews.
Knowing When To Let Go
Letting go of a client can be difficult, but says it’s for the best.
“During the relationship development phase, once our best advice has been rejected, we don’t initiate with the prospect again,” Tanney said. “Of course, we would always pick up the phone to speak with the prospect should they change their minds, which often occurs down the road.”
To keep clients on the same page, Tanney advises a peace offering, of sorts.
“For those clients who need to act on their impulses, we carve out up to five percent of their investments upfront for them to trade,” he said. “We call that portion the speedboat money; let the client get their views and energy out in a non-destructive way. The other 95-99 percent is the battleship, which we captain regardless of how well the speedboat performs.”
If a client keeps rejecting an advisor’s advice, at some point, it’s likely appropriate to fire that client, said Russell Rivera, president of New York City-based Voice Wealth Management.
“If a client isn’t not acting in their best interest and doesn’t want to follow your advice, why are they paying you in the first place?” Rivera asked. “You’d be better off helping someone who appreciates what you provide and will take actions that affect them positively.”
Brian O’Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC’s Guide to Creating Wealth. He’s a regular contributor to major media business platforms. Brian may be contacted at firstname.lastname@example.org.
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