Your neighbor’s now a client. World events rattle the markets and she’s getting anxious. If you borrowed her shovel and broke it, you’d feel a sense of responsibility. So what do you do when she’s losing money?
She’ll hold you responsible to some degree. Consider:
Which came first?
Was she a client before she became a friend? Your professional credentials will likely carry weight.
If she was a friend before she became a client your proven integrity works to your advantage.
Were you at fault?
This has three answers.
If you made suggestions, and the market’s doing well but she isn’t, your recommendations are on trial.
If she owns good investments and broad market turmoil’s bringing everything down, she may be more understanding.
Finally, if she calls the shots and you place the orders, it’s hard to pin all the blame on you.
An advisor in New York I know recommends giving friends the same service your best clients get. That’s especially true when you share a backyard fence.
It’s all about them
If the market’s down your entire clientele’s anxious. What about you? Your investments are also down. Your spouse is worried because your income’s affected, and you aren’t sleeping. None of this matters to clients, so don’t bring it up.
Explain: “I understand how you feel and why it’s upsetting. I’m taking this very seriously. I realize you placed your trust in me.”
Proximity influences expectations. She doesn’t want to hear about your office hours, and assumes in emergency situations friends immediately come to each other’s aid. Conversely, she will want you to respect her personal space. She doesn’t want to be prospected while mowing the lawn.
Explain: “You’re a friend, not just a client. If I feel we need to talk business I will limit my contacts to business hours. You’re not held to the same rules. If something serious is on your mind and it needs attention, you can contact me anytime.”
She lives fifty yards away. Use this to your advantage by letting her know you’re on top of things. Insist on periodic portfolio reviews even if there’s bad news.
Explain: “I appreciate your trust; however, it’s important you understand how your investments are doing in the current climate. We last got together in January, so it’s been three months. Let’s sit down again.”
Sometimes adding money is the last thing on the client’s mind, but it could be the right thing to do.
Explain: “We own good companies that are selling for less than when we bought them. They’re still good companies. Even though the market’s volatile you should consider adding to (Company X) at these levels. Here’s what I think we should do.…”
Expect good-natured abuse in public
She isn’t happy but values your expertise. At a party she might say: “Suzie’s my broker. She’s also the reason why I am broker!”
Explain: “Jen, I appreciate your trust. We both know investing isn’t like musical chairs when the music suddenly stops. It’s an ongoing process. I realize it’s tough for everyone when the market’s volatile. Patience is a virtue.”
Expect pushback on fees
She jokes that she doesn’t know why she’s paying you if she’s losing money. But she still wants a serious answer.
Explain: “Jen, you work in the pharmaceutical business. You’re in marketing. If you work hard but the firm loses money you still get paid, although you might not receive a bonus that year. Treat me with the same consideration.”