Friends are supposed to have your best interests at heart. But how many times has a buddy, colleague, or life partner led you merrily down the wrong path? Heaven knows, it's hard enough to keep teenagers from falling under the influence of bad company.
When the victims are adults, grown-up egos can get in the way, forcing you to tiptoe around the issue of who knows best. Here are some ways you might reconnect with clients who have been led astray.
Q: My clients, "Jack" and "Jill," have had a well-balanced investment plan for years. Recently, Jack ran into a former fraternity brother, now a broker, who got him so excited about a new hedge fund that Jack promised to invest $100,000 in it, despite Jill's opposition. Hedge funds may be right for some, but it's not appropriate for Jack. What's the best way to approach him?
A: Because of the way their brains are wired, many boys get an exhilarating rush from taking risks–especially when other boys are around. This may explain, at least in part, why male investors so often lose money acting on tips from their buddies.
Approach Jack by empathizing with him on the pleasure of meeting his buddy. It's understandable that he'd like to do business with someone who shares a history with him. Does he have good reason to trust his former fratmate's judgment? If not, what makes this opportunity feel so attractive to him?
Once you've explored the emotional content of his desire to invest, you may be able to impart some rational information about this particular hedge fund and why it doesn't fit into his plan. If he's still determined to jump into the fund, ask him to walk through some scenarios with you. For example, if he makes the decision to invest without his wife's consent, how will she feel about it? If the fund craters, what will this do to their relationship? Is there some middle way to satisfy them both?
If you first empathize with your client, then provide information to balance his perspective, and finally guide him through various outcomes and their consequences, you stand a chance of getting him to reconsider his impulsive promise.
Q: A couple of years ago, my new client's live-in boyfriend made off with some money he had promised to invest for her. She was too embarrassed to press charges, but she's never gotten over it. Today, when she should be investing for retirement, she insists on keeping her money in the bank where it's "safe." How can I persuade her that she can trust me to manage it for her?
A: Something similar happened to my friend Barbara Stanny, author of Overcoming Underearning: Overcome Your Money Fears and Earn What You Deserve (Collins, 2006). When her first husband cleaned her out, it became a wake-up call that launched her on a path of financial self-empowerment. She found experts to learn from (and with) as they helped her rebuild her assets.
Other people, like your client, respond to betrayal by putting up a wall around their money. Even without having been traumatized, many women are worried about making mistakes if they invest. As a result, they let their money sit in an account where it earns next to nothing, while knowing in their heart of hearts that this is not the best thing to do.
So if you're willing, you have some therapeutic work to do here. First, let your client know that you understand how devastated her boyfriend's treachery feels to her. Urge her not to blame herself for having trusted him. He is the exception, not the rule.
Once she feels that she's not being judged, you can begin coaching her on how to evaluate whether financial professionals (like you) are trustworthy. Discuss possible ways to increase her confidence level. For example, you might volunteer to provide her with letters of recommendation or e-mail addresses of clients she could contact. By all means, show her your professional credentials and your Form ADV. Explain how you work with your clients to define goals, assess risk tolerance, develop an investment strategy, and review performance. Remind her that the biggest financial risk of all is outliving her money.
If you're patient and supportive as you guide her, I bet she'll slowly gain trust in your expertise and good faith.
Q: A business owner I have been working with lives far from her mother, who has just entered an assisted-living community. After struggling to manage her money since being widowed, the mother is thinking of giving power of attorney to a neighbor who has offered to help. My client can't leave her business to sort things out. How can she dissuade her mom, who has pooh-poohed her warnings?
A: Without knowing if this neighbor is one of those parasites who latch onto older people and steal their money, I think your client should be worried. She should call her mom right away and say that she's losing sleep over the prospect that her mom would trust her finances to a stranger.
