It happens to the best of us. It’s 8:00 a.m. and a client calls to vent about his portfolio not performing. He hasn’t slept all night, and he wants to start your day with that news.

This isn’t a dream. Difficult clients are a reality and chances are you’ve worked with a few. They drive you crazy, call when it’s inconvenient, and consume your time. Chances are your last family reunion went smoother than dealing with some of these folks. But, tough clients are a reality and advisors need to learn how to deal with them and move on with their businesses.

The relationship between investor and advisor brings with it a complex set of expectations. When you add frustration, confusion and a volatile market into the mix, things can get difficult. How can you identify the difficult client and work with him or her towards a resolution? And, how do you know when to let a client go?

Time is Money

With 20 years of financial planning under his belt, Chet Brothers knows the importance of avoiding difficult clients. And his years in the business have given the RFP a pretty good sense for people.

He knows there are difficult clients, and then there are clients who are in difficult situations. He also knows there are clients he’d never want to work with. One of the joys, he says, of owning his own practice, Brothers & Company Financial in Regina, Sask., is the client selection process; noting it’s quite different from his stints at larger financial institutions, where he was obligated to work with everyone.

Brothers’ experience has taught him there are two levels of tough clients: difficult, and just plain impossible.

“Some people are just toxic and not worth dealing with no matter how much money they have,” Brothers says. “They take your time and your energy and the time and energy of your staff.”

What are the characteristics of a toxic client? Someone who demands things an advisor can’t deliver, has expectations that cannot be met and who asks for things that are out of line with the philosophy of the firm. “My experience has been that once you get them out of your lives, your income immediately goes up,” Brothers says.

Of course, it takes time to truly understand what people are about. Good communication is expensive and takes time to establish. And that time equals cost. So how do you reach a conclusion? Determine your acceptable level of difficulty, and then weigh what’s being dished out against upside benefits of having that person as a client.

And, learn to recognize what a client has simply been dealt a bad hand. Whether that’s unexpected life changes, divorce, death, or a major market crisis on the brink of retirement. No matter what the circumstances, some clients just aren’t prepared for what life throws their way.

Brothers recalls one couple – both educated, intellectual people but who had no experience owning any investments that had variability in return, until recently. When the markets dropped, they panicked.

Brothers knew he needed to be proactive. He met with the clients, looked at their portfolio, examined their initial plan, asked about their goals, and explained their holdings. In the end, it wasn’t as bad as they thought, and right now their investments are above water.

Sometimes a difficult situation presents an opportunity to re-balance portfolios, re-examine goals and confirm investment objectives. “Patience, empathy and a good understanding of investor behaviour are all necessary ingredients in defusing the difficult client,” Brothers says.

Concern or Complaint?

For Robert Kelland, working at a larger firm like ScotiaMcLeod has its benefits. The check and balance process, which requires advisors cross their t’s and dot their i’s, has come in handy when the inevitable happens – client complaints.

“In the course of a market cycle, you are going to have some clients voice their concerns,” says Kelland, a director and portfolio manager in London, Ont. During this time, advisors will come across clients who are not happy with the market, are unhappy with their portfolios, and will complain.

However, it’s important to recognize the difference between a concern and a complaint. If a client says he or she is happy with a portfolio “except for a couple of items,” that’s not necessarily a complaint but a concern.

But if a client says, “I am not happy. I don’t think my performance is there. I don’t think you have done what you told me you would do,” then the advisor should take this seriously, according to Kelland.

“Psychological studies have shown that when people make money, they are happy, they don’t complain, their life is good. When they lose money, the pain factor is much greater than on a sunny day,” he says.

To avoid escalating complaints, Kellend says the Know Your Client form is key. It doesn’t take long to fill out, nor is it difficult to keep updated. But in the end, it’s the best protection for an advisor. Always remember, he says, “Any client can launch a complaint. In that regard, we are sitting targets in some ways.”

An advisor knows the importance of a strong client relationship. Putting measures in place that protect both advisor and client from escalating problems not only conserves time, but also improves service and helps retain the client.

Power of Circumstance

Kathleen Clough, an investment advisor at PWL Capital Inc. in Toronto, has learned that when client complaints about their portfolios, it’s best to let them vent.

However, when an unforeseen circumstance stirs calm waters, an advisor must recognize that the client is in a difficult situation and step in quickly to help.

Clough calls to mind a couple who came in to talk about their portfolio. She quickly learned the husband had been diagnosed with a brain tumor. “We were working to make sure that all the ducks are aligned,” she says. “What we did was make sure that we did our job.”

That job entailed seeing to it that wills met with the client’s current wishes, making sure beneficiary designations were in place and that the couple accomplished the things they wanted to accomplish in their remaining time together. It also meant taking care of pension information, so that the wife would get everything after the husband passed away.

The final step was to stay in touch. During that time, Clough and the clients did things along the way that helped make things easier. The couple sold their car, and made sure all ownership details related to their investments were as effective as possible.

A year after diagnosis, the husband passed away, and when the wife visited the lawyer to take care of his estate, he told her she didn’t need him because the estate was properly organized. Clough says this made her feel very good.

“Dealing with clients, from my perspective, the investment management is part of the implementation of the plan,” Clough says. “But the plan is everything from what happened if you died yesterday to what happened if you live to be 100.”

Both investment planning and estate planning are integral to management of client wealth and financial affairs. For Clough, the process of getting to know a client well and understanding his or her needs is crucial to preparing them for life’s tough moments.

“This allows you to get an idea how [the clients] are going to react to different situations,” she says. “Be aware of the situation and how to calm [the client] down.”

No matter the situation, sickness or health, an advisor needs to understand client expectations and part of the implementation of the investment statement is trying to manage those expectations.

Minding the Details

Open communication goes a long way toward setting a good dynamic in motion. Keeping detailed notes and records of all correspondence – the good and the bad – also helps, says Kellend.

He and his staff keep careful records of all communication, including the date, time and a short summary of each exchange. Meeting with clients regularly is also important, as it allows the parties to review and track changing goals.

Oftentimes recognizing the clients who will require a high degree of service and communication is half the battle. Knowing how to respond is the other half.

Higher maintenance clients require a greater portion of your time, but they shouldn’t be confused with those who are simply engaged in the investing process. The latter category can often be fun and rewarding to work with.

The high maintenance ones, however, tend to call often, question the latest market report and have expectations of service levels that are just too difficult to meet. It’s crucial to be able to sense and identify these needlessly challenging clients for the betterment of the team, and ultimately for the client, according to Kelland.

Whether difficult or high-maintenance, Kelland says the best method is to note all contact, and keep all the relevant documentation handy.

Parting Ways

Learning the characteristics of difficult clients will not only help advisors reduce their frustrations, it will also help them conserve time, energy and build more satisfactory businesses. And, when their heads are clear, advisors have the potential to make more effective investment decisions for their clients.

However, when a relationship doesn’t work or the motivation is gone, it may be time to part ways. “You generally know. You have a gut sense, a feeling in your conscience,” says Kelland. When he senses something isn’t right, he brings in the branch manager, who calls up the client, asks him or her to come in and discuss what’s not working.

“The worst thing you can do is, when you have red or yellow flags, is to ignore them,” he says. “You must address the yellow flags before they become red flags.”

Spotting the yellow flag is the trick. When Kelland hears his clients say he or she is not happy, that’s the first warning; when a client deviates from a long-term strategy, that’s another sign. And when either a spouse or someone else starts giving the client investment advice that doesn’t sound like the client’s original goals, Kelland starts to worry. On each occasion, a branch manager is notified and if it’s determined a transfer is necessary, a different advisor takes over the portfolio.

For Clough, spotting the red flags early in the relationship saves her the awkward moment of parting ways.

“Spending time up front to fully understand the client is almost as important as what you do afterwards,” says Clough. From an investment point of view, someone who doesn’t agree with the PWL philosophy is probably not going to be happy, and according to Clough, chances are they will be better off with another firm.

Working in a boutique type business, there’s a common philosophy and all the advisors know each other. This made it easy for Clough, recently, to take over the clients of one of her colleagues. Her colleague has retired and for the past year, Clough has been getting to know the clients. The common investment philosophy allowed the transition to be managed smoothly.

According to Clough, transitioning clients is a situation where an advisor needs to recognize that it may be better for that client to work with a different advisor. If appropriate, she would have no hesitation in making a referral to a different advisor in the firm. It’s when the client no longer wants to follow the philosophy that the relationship is over and Clough has no problem suggesting a move to another investment manager with a better fit.

In the end, an advisor needs to weigh and measure the difficulties with which they are presented. If the difficulty outweighs the benefits, it may be the right time to part ways. As Kelland pointed out, being professional is one thing, but an advisor needs to be honest, to themselves and the client.

And when the motivation is no longer there, no matter the income, it is just not worthwhile holding onto something that isn’t working.


  • Anna Olejarczyk is a Toronto-based writer.