Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
What do you do when one of your best clients is spending their way into oblivion?
I have a very wealthy client who had a health scare about 14 months ago. It was a difficult situation because he was told he was going to die within a few months. He got his estate in order and prepared, and then, through a number of things too extensive to go into in this note, he found out that his diagnosis was incorrect. While he was sick and needed treatments and medication, he was not going to die – at least in a short or predictable amount of time.
This experience changed him completely. He was a man who had built a business and sold it and earned millions doing so. He was very conservative in his investments and careful about the decisions he made. He worked collaboratively with me to make the right decisions. He brought his wife in on everything and was open with his children.
Now he is a man I don’t recognize. He has a “seize the day” attitude toward everything and ends every conversation with “Carpe Diem!” He is spending money like crazy. He recently bought himself a Maserati, a new home on the water in Florida and he is taking an around the world cruise in a couple of months. It’s like he can’t find enough ways to spend quickly enough. He has a lot of money in our portfolios and it’s not like he cannot afford to do these things, but he now seems to have no regard for the future.
At one time we would plan for him and his wife living well into their 80s and beyond. But now he seems poised for an exit before he reaches 70 (he is 67 years old). I’ve tried talking to him about this dramatic change and have even asked him to speak to a therapist about the trauma of going through a life-ending diagnosis and then recovering from it. I realize it is very emotional and unsettling. But as his fiduciary I can’t stand by and just let him burn money like this. I’ve tried speaking to his wife but she is so happy he is alive and doing fine, she doesn’t want to intervene or take away his happiness. I don’t have the relationship with the kids directly and would not be comfortable talking to them. In the couple of meetings we had together, they made it clear they see this as his money and not their legacy. If there is something left, that’s great but they are making their own livings and don’t need to count on a bequest.
This situation is really troubling to me and I believe there is something I could be doing differently if I could just figure out what it is. Any insight or help you can offer would be appreciated.
P.A.
Dear P.A.,
As long as I have been writing this column, I’m always fascinated by how advisors find new and interesting things to write to us about! This one has so many elements – multi-generational relationships, advisor as counselor or confidant, facing one’s mortality, entirely shifting a life perspective and – oh yes, smart investment strategies.
I applaud you for being concerned and taking a number of steps to try and have a conversation to make sure the client is thinking straight and making objective decisions.
On that note, consider if you are being entirely objective about the situation. I know it is a very sticky subject, but most advisors don’t like it when AUM goes out the door. I know you say you are being a fiduciary, but you also mention this client has a lot of money and has been very conservative to date. The spending you outlined – a cruise, a car and a new home –could be a small amount of what the couple has in savings. Is it possible there were some “bucket list” items he was delaying and now he feels free to purchase them? Are there other large items on the spending list, such that you would worry the outflows are going to continue at an aggressive rate? I am not questioning your professionalism, but it is important to do some self-reflection anytime we question someone else’s behavior.
Assuming you are on track and he is going to spend himself out of money, the spouse should be consulted. I know the children aren’t waiting for their inheritance, but maybe a conversation about how the wife would be left with nothing if he spends it all, something happens to him and she still lives for another many years. Perhaps you could run some projections and sit down with both of them together. You talk about speaking to him and then speaking to his wife, but not about speaking with them together. Outline some projections and show what a precarious position the wife might be in (assuming she would be). That might help him think about something other than himself.
Sit down with both of them to talk about bucket lists and goals and revise some of your original work together to take this new development into account. It sounds basic, but often advisors overlook the opportunity to do a complete reset with a client. See if you can start over with them to take into account his new perspective and desires.
Dear Bev,
I know you have addressed this before, but what do you do when a client is irascible and difficult no matter what you do for them? This client is abusive to my staff. I end up taking the anger directed at me. It’s exhausting. We are generally very well-liked by clients, but having someone who is constantly picking at us is distracting and distressing. Is it time to just fire him?
B.M.
Dear B.M.,
It might be. The best thing about running one’s own business is that you get to pick and choose the clients with whom you work. We have a philosophy at our firm that we only work with people who are nice. They can get angry, they can be direct, they can demand answers, but fundamentally they have to be nice human beings whom we like to deal with on a regular basis.
However, before you take the step of showing him the door – try changing your response to him. Very likely because he has been combative and difficult, you do the same thing all of the time to try and appease, or argue with him, or calm him down. Reacting the same way never works. Many times it aggravates the situation when someone is irascible. Examine your own actions and reactions. Are there different choices you could make in responding to him? Could you call out his behavior – “It seems that every time you call me you are upset and angry with us. Are you sure we are still the right firm for you? I am personally concerned we just aren’t able to do what you need us to do.” Sound shocking? Sometimes calling an audible is exactly what you need to do when you get stuck in a rut with someone.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. In 2008, she co-founded Advisors Trusted Advisor to offer dedicated practice management resources to advisors, planners and wealth managers. She is currently an adjunct professor at Suffolk University teaching undergraduate students Leadership & Social Responsibility. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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