There is a blue pot made of clay with a cork lid that is predominately displayed on the top shelf of the cabinet in Stepp & Rothwell’s conference room.
At first glance it appears innocent enough, until you read its conspicuous inscription: “Ashes of Problem Clients.” Fortunately for our clients, and for us, the clay pot is empty. However, this does not mean our clients haven’t challenged us at times.
There aren't really problem clients so much as there are clients in problematic situations. So as financial planners, how do we head off potential problems when clients don’t follow our plan for them or they take us out of our “comfort zone?”
Heading off potential problems requires identifying mismatches from the get-go. Is the prospective client seeking unreasonable investment returns? Are they looking for a quick-fix to their problems? Are they “Do-it-Yourselfers” that are unwilling to give up control or to entrust you to make decisions on their behalves.
Planners should start each engagement with the goal to create a win/win relationship with the client. Clients only interested in entering a win/lose relationship will likely make sure you end up on the losing side.
Addressing the challenges of existing clients can be as rewarding as it is vexing at times. We've all had client meetings that resemble the movie "Groundhog Day" in which a weatherman played by Bill Murray, lives the same day over and over again.
Or maybe it’s the meeting with the over-spenders that ends with you telling them: “Start spending less or you will run out of money.”
Or maybe it's with the ambivalent avoiders that respond to your repeated request to execute an estate plan by saying, “Yes. We need to do that.”
It is easy for us as financial plannersto analyze data and make recommendations. It’s more difficult for us to understand why clients don’t do the things we tell them to do. When this occurs, there is a mismatch between our expectations and the client’s readiness to take action. At this point, you should step back, recalibrate and recognize that the client may need more support to change behavior.
Sometimes clients challenge us in ways that go beyond financial planning. When there is strong bond between the financial planner and the client, the client is more apt to discuss emotional issues stemming from family stresses, marital problems, or deep unhappiness that make us uncomfortable. How prepared are you to respond if a client desires greater personal involvement than you are willing or able to provide?
Getting inextricably involved in a client's problems can drain your time and cause you to lose focus and objectivity on financial planning issues. It's important to know what is going on in your client's life to effectively plan for them, but you don't have to solve all of their non-financial problems.
CFP® Professionals must recognize when they are able to address their client’s non-financial issues competently, and have the wisdom to know their limitations. In these cases, collaborating with a therapist may lead to a more effective long-term relationship.
There are three possible outcomes from prolonged financial planner-client dysfunction: Things will get better, worse, or stay the same.
Effecting positive change in a client’s behavior can happen through a concrete plan with clear goals and objectives delivered in a low-key manner. There are no quick-fixes, so expect reasonable progress to take months, if not years.
If continuing attempts to effect positive change don’t succeed, then there is a temptation for the planner to blame the client for the failure of the financial plan, which could lead to terminating the engagement or allowing the relationship to deteriorate to the point where the client does not return. A client’s reluctance to make recommended changes can also become a liability.
The founding principal at Stepp & Rothwell, Kathy Stepp, gave me a great piece of advice about fostering a client relationship. She said, “Never respond to client’s request with, ‘It’s not a problem.’, because that insinuates that it is a problem.”
We don’t have problem clients; just problematic situations that clients are looking to us to help them solve. With patience, understanding, and a concrete plan to effect positive change, we can convert these situations from problems into successful outcomes. For the exceptions, I have a blue pot where you can put them.
Dan Mathews is a financial planner with Stepp & Rothwell in Overland Park, Kan.
Before joining Stepp & Rothwell in 2001, Dan worked for five years as a specialist in Investor Relations and Retirement Plan Services at American Century Investments.
In October 2011, he was selected to be a CFP Board Ambassador, serving as a consumer advocate and representing more than 63,000 financial planning professionals who hold the CFP mark.
He has a Bachelor of Business Administration degree from University of Missouri-Kansas City.