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You have heard it all before. All things being equal, people prefer doing business with someone they like. Since liking someone can be subjective, this can be relaxed to “someone they already know.” There are many reasons why people hesitate to do business with friends. Confidentiality is a big one. What factors get them to send the business to a friend?
The points in this article are explained in detail in my book, Captivating the Wealthy Investor. It’s available on Amazon.
Reason #1: Trust. When dealing with a friend, trust is already in place. Trust comes in varying depths. If you served in the miliary and had each other’s back in active combat, that is a pretty deep level of trust. If your neighbor would be comfortable with you watching their child while they were away on the weekend, that is also a significant level of trust.
Logic: When you meet a financial advisor for the first time, you are a “walk in.” The other person is a stranger. You would not ask a stranger to look after your child if you needed to go out of town on an emergency.
Reason #2: Understanding. A former client said it well: “A friend understands the tapestry of your life.” Financial planning is great, but it is not intuitive. The tools are excellent, especially projecting future income, returns and expenses across different scenarios. Advisors are trained to put prospects at ease. There are no formal questions a stranger could pose that address: “What is the strength of your marriage?” or “Are you please or disappointed in your children.”
Logic: Those two difficult questions point back to the tapestry of their life mentioned earlier. A friend understands issues that are below the surface. These issues will have an impact on their planning and decision making.
Reason #3: Personal attention. Every business has good clients. If you belong to a hotel or airline rewards program, you understand there is a pecking order. Everyone gets attention, but not at the same time. Everyone wants personal attention, to be treated as an important client. Your friends know some people get a call before others.
Logic: Friends know advisors have some clients who are larger than others. Attention and responsiveness is likely aligned with this in mind. They know they are “small fish” in this pond, but assume the friendship factor propels them up to big first status. They may be unaware you have a system (and a smaller client base) that elevates everyone up to a higher response level, but they think friendship will get them more attention than they would working with a stranger elsewhere.
Reason #4: The known quantity. Imagine you are a walk in at another firm. The receptionist introduces you to a financial advisor. In years past, this was “the broker of the day.” They are a stranger, am unknown quantity. You do not know if they are the most experienced advisor in the office or someone who might be out of a job or changing firms in two weeks.
Logic: Lack of knowledge about them keeps a certain emotional distance. You have seen this firsthand. When you gather background in the getting to know you phase, some people ask: “What do you need to know that for?” It takes weeks or months to get comfortable enough to open up to the new advisor. When the advisor is an old friend, you understand each other already. You are more receptive to answering their questions, giving them the information they need to make suitable recommendations.
Reason #5: Unbiased, objective advice. When people talk about the skills of a doctor, a “good bedside manner” is considered an attribute. When a relationship is new, it can also be fragile. An advisor might not want to alarm the new client, so they soften their advice, being careful not to sound critical or judgmental. Sometimes the severity of the situation gets lost in the messaging.
Logic: Longtime friends got past this stage years ago. You have heard the expression: “How is that working out for you?” when a friend explains something stupid they are doing. If your friend is the advisor and they think you are doing something detrimental, they will tell you up front and explain their logic. You do not have to try decoding their comments for hidden messages.
Reason #6: Referral source. The friend might not have the assets to be a big account. You help them anyway by taking them on as a client. You give them attention. They have your client experience. You might have taken them on as a favor, but they bring an unspoken advantage to the relationship.
Logic: Now the friend has firsthand experience of how the advisor helps people. They also learn the scope of your products and services. They know plenty of people. When they uncover a need within their circle of friends, they are in an ideal position to explain how you can help. If their friend asks: “Do you do business with their advisor yourself?” they can confidently answer yes.
Reason #7: They like you. Good friends are emotionally invested in each other’s success. They are rarely in direct competition in the same field. They want to see those around them succeed. It’s a form of support network.
Logic: The friend realizes they will be spending money on fees. If they have the choice to send those dollars to a stranger or someone they know, they often will choose the friend because they are helping that friend succeed.
Many friends might be off your radar as potential clients for various reasons. You have not approached them, but they may be waiting to be asked.