We want our friends to become our clients, but sometimes they don’t want us. The reason can often be a lack of understanding or misinformation on their part. Here’s what you can do.
Nine Misconceptions You Can Correct
Let's look at some logical reasons your friends aren’t doing business with you.
1. Confidentiality. Your friends are some of the worst gossips around. Unfortunately, so are you. None of you considers it gossip—you are keeping up on news about friends in common.
Issue: Your friends are concerned if they became clients, you would include details of their financial health in the rumor mill.
Approach: It’s tough to give up the gossip habit, but you can let them know discussing client relationships is off the table. Doctors, accountants, lawyers and priests are bound by confidentiality. Including yourself in this grouping elevates your professional status.
2. Understanding. Here’s something that raises an advisor’s blood pressure: A friend explains they just opened an account with a competitor firm. When you counter: “I do that too. Why didn’t you come to me?” they say: “I never knew you did that!” It’s even worse when they are having a bad experience.
Issue: A New York advisor remarked: “Friends may have wanted to do business with you for a long time. The thing they don’t understand is why they need you.”
Approach: Drip on them. When they ask: “how’s business?” you hear the question as “how have you helped someone?” Time for a short anonymous story.
3. Risk to the friendship. They become a client and suffer heavy losses. They fire you as their advisor. Now the friendship is sinking along with the business relationship. The problem is often the client doesn’t accept responsibility.
Issue: The risk to the friendship is always on the downside. If you make them money, the risk goes away.
Approach: Another New York advisor would stick with the classic building blocks like large cap growth and value. As the relationship progresses, the client often has suggestions. The advisor’s aim was to diversify and their ideas fit in with the portfolio. If the market suffers a downturn, the core holdings often perform better or decline less than the riskier parts of the portfolio. Since the client has often suggested the riskier parts themselves, they realize the advisor has reasons for the conservative approach. The client often takes responsibility.
4. Have you asked? This seems so obvious. Everyone should have the opportunity to say no.
Issue: They might have made the decision in their minds, but aren’t taking the first step. A Northern California advisor approached a guy at his club who responded: “I was waiting to be asked!” When the advisor wondered why he didn’t make the first move, his answer was: “I assumed I was too small.”
Approach: Suppose you know a friend already has an advisor. It’s easy to say: “I’m sure you are happy with your current advisor. Here’s my card (or you have my contact information.) Please let me know if anything changes.”
5. The curse of HNW. You work with high-net-worth individuals. You talk about playing golf at your club or taking them to see the U.S. Open because your firm is a sponsor. Your friends think they don’t have enough money.
Issue: High net worth always sounds like “more money than you’ve got.”
Approach: You can “make it a point to help friends.” Alternatively, in those anonymous success stories you started telling in point #2, you can add in dollar amounts to establish a sense of scale: “A $250,000 retirement plan rollover” or a “$300,000 inheritance.”
6. All the seats are taken. If you are seen as successful, friends might assume all your clients are long-term relationships. The newbie advisors in the office get the new accounts, not you.
Issue: They would want you handling their money. They assume you aren’t adding new clients.
Approach: More drip marketing. “A client sent his brother-in-law in my direction today. It started with answering a few questions, but we clicked and he became my newest client.”
7. The timing is all wrong. There was a cartoon years ago, probably in the New Yorker where the guy getting cold called says: “What a coincidence. My bank CD for $250,000 just came due today and I’m looking for a broker.” It’s a cartoon because that doesn’t happen.
Issue: You brought up business, but they are embarrassed to admit they don’t have funds liquid right now.
Approach: Congratulations if you brought up business. You can anticipate this issue by saying: “It’s unlikely you are looking to do something right now, but I wanted to get onto your radar.” You mention future possible events like their annual bonus. When does that happen?
8. Your lack of experience. This is awkward. They like you a lot. You were a great mechanical engineer at the old firm, but what do you know about investing? They are thinking about the stockbroker stereotype.
Issue: If you are new, they don’t want you practicing with their money.
Approach: Sell the firm. Position yourself as the relationship manager. That should be a more comfortable fit.