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The advisor/client relationship practically translates to business/customer and it’s often said the customer is always right. In recent years, that style of thinking has shifted because, regardless of the business, some customers are real pains in-the-you-know-what.
Still, the advisor/client relationship is often positioned from the client perspective. As in what prospects should look for when evaluating advisors and what turns clients into former clients. However, the world isn’t perfect and people certainly are not meaning it pays for advisors to identify the signs of “bad clients” and know how to part ways with them.
The notion of ending a relationship with a client might take some advisors by surprise. After all, under a fee-based model, the more clients/assets under management, the merrier. That’s not always the case because there are instances – hopefully limited – in which a client is just too much of a mental drag on an advisor to make the fees worth the trouble. For better or worse, many of the folks that end to be clients worth firing display certain behaviors that easy to identify.
Client Red Flags to Watch For
There are instances in life in which getting a second opinion is something that should be done. For example, a doctor recommending an invasive procedure or tough treatment regimen should encourage patients to seek a second opinion.
That doesn’t always translate to the world of financial advice because the client engaging in such behavior is apt to pit one expert against another and ultimately never be satisfied with answers and advice they’re receiving.
“A client who argues that their accountant, their attorney or another advisor knows more than you is a warning that it’s probably time to end that relationship,” according to the Million Dollar Roundtable (MDRT).
At the end of the day, the client engaging in that type of behavior is signaling they don’t trust the advisor and they may never get there. That’s not the advisor’s fault. If anything, it makes the client easy to get rid of because the advisor can simply say, “You don’t trust me and I don’t do business without two-way trust.” Adios bad client.
Another telltale sign is refusal to engage or follow advice. MDRT highlights an example courtesy of Travis Manning, an advisor in Ontario, Canada. He tells the story of a client in her mid-70s that got the bitcoin itch. He told her that crypto was far out of risk-tolerance spectrum, but she pushed and liquidated a third of her account. Manning parted ways with that client because she did significant damage to retirement savings that there was little hope of any advisors being able to do enough to get her accounts back to solid ground.
Watch Out for Know-It-Alls
Today’s clients are increasingly sophisticated and financially literate and many are investing on their own in addition to the accounts they hold with advisors. Broadly speaking, that’s a positive, but it can also create encounter with know-it-alls and faux experts.
Think about it those bad clients this way. In theory, an advisor that generates annual returns of 15%, 12% and 20% for a client over three years should be commended. However, some clients might question the variance or perceived volatility. Some might say “Hey, the S&P 500 did 17% when you delivered 15%.”
Those are all those types of behaviors that can signal overbearingness, unreasonable expectations and the possibility of being verbally abusive to the advisor or staff. Those are also hallmarks of a client that’s not worth the hassle.
Related: With Advisor Help, Gen X Can Get on Right Retirement Track