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Perry Mason has a great line in one of those only B+W episodes. “There are two people you should never lie to: Your doctor and your lawyer. It could cost you your life.” You can see how that advice makes sense. As a financial advisor, accountant or financial planner, you can also see why you should be included on that list. Have you ever had that uneasy feeling your client is holding back a critical piece of information?
What might it be? The conversation might start, in a one-on-one situation by asking “What are you not telling me?” Here are some possibilities:
1. Your client might lose their job soon. This can happen when companies decide to tighten their belts and restructure. From a financial standpoint, they might need access to cash or their credit line soon.
Conversation: You would talk about having access to cash or credit. Are they a dual income family? That can help. As their advisor, are you in a position to talk with them about their career and possibly make some connections that might lead to their next job? If you can be part of the solution, they will not forget.
2. A divorce might be a serious possibility. This can be a problem on many levels. To you, the financial aspects might be obvious. There is also the stress and emotional impact. There might be children involved. Friends might take sides.
Conversation: You do not want to take sides. You do not want to help either party hide money. You could be asking questions concerning counseling. Have they considered other routes besides divorce? This is a situation you want to bring to the attention of your Compliance manager. This is not the first time your firm has encountered this situation.
3. There is a serious illness in the family. One of the early warning signs is your client might seem distracted and not want to make any investment decisions. This can also involve not illness, but a need for long-term care. This is a stressful time, and your client might not understand all the available options.
Conversation: Can you draw your client out? Do you have any advice you can offer? Do they have the best available doctors? You may have seen this problem before, especially if you have many older clients. Does your firm have a deep bench of specialists? Can you connect your client with an internal person who may be able to offer advice?
4. A large inheritance may be coming in their direction. This is good news for the client. It might be accompanied with bad news if they are losing a beloved relative.
Conversation: No one should get too hasty. These things can take a long time to come to fruition. The person might still be alive. If they have passed away, the court proceedings might take time. A lawyer and accountant are probably involved. If not, they should be. Although you might think of how the money should eventually be put to work, your client should not start spending as if they already have the money. They might quickly dig themselves into a hole and find the expected money is taking a long time to arrive.
5. They have not been forthcoming with the IRS about sources of income. Perhaps they have a thriving business on eBay. Maybe they work off the books as part of the cash economy. They mention this in passing.
Conversation: If you are not their accountant, advise them to get one immediately. The problem will only get bigger if they try to conceal it. The government has plenty of ways to look in dark corners we do not know about. A good accountant may be able to get this problem addressed before it gets out of control.
6. They have lost money in investments you were unaware they owned. Your client discovered something that might be charitable called an “alternative investment” online. They invested money and lost a lot. Hopefully this has not involved going into debt. This has not come from the funds they have with your firm.
Conversation: This is another instance where your client needs a good accountant. They need to “come clean.” It might be possible for them to offset some of their losses against gains you could realize elsewhere. Help your client find a good accountant. Has your client learned any lessons?
7. They are planning to change advisors. This can happen when you sense the client is establishing distance. They are very polite. Nothing upsets them, but they are not following your advice either. They might have mentioned they are “Thinking of making some changes.”
Conversation: Try to get a-face to-face meeting with your client. If it is a joint account, both parties should be present. Try to draw them out and let them do the talking. I have always liked an expression I learned from a New England advisor “What can we do to move forward?” If it seems this is a “done deal.” Try to lay the groundwork for keeping in touch and leaving the door open for them to return. Plan on following up afterwards from time to time.
8. They have let insurance policy premiums lapse. Your client might be short of cash and assumed this couldn’t hurt all that much. They are walking away from protection they might need sooner rather than later.
Conversation: Are you their insurance agent? If not, try to get them into direct conversation with the client. Do they have accumulated cash value in a whole life policy? Are there ways they can repair the damage without their coverage ending? Can you think of ways they can find the cash to keep their policies current?
9. They have skipped mortgage payments and might be facing foreclosure. This could also apply if they have skipped rent payments and are facing eviction. Although most of your clients have assets, people do get into trouble and struggle to keep their heads above water.
Conversation: Their priority should be to keep a roof over their heads. Do they know the damage this will do to their credit score? Can they borrow against their 401(k) at work? Are there other sources of relief in their portfolio? Does your firm have a specialist who can offer practical advice?
Clients often face problems and do not know where to turn for advice. You may be in a position to help them, yet they do not see you in that context. You need to draw them out and learn as much as you can. Do not be judgmental.