Separate business from pleasure—the separation of church and state. There are plenty of situations where relationships are compartmentalized. Some advisors prefer not to do business with friends. What are their reasons? Is this a good idea?

Why Avoid Doing Business With Friends
No one walks away from business, do they? What could be the reasons?

1. Risk to the friendship. You place a value on the social relationship. If a friend becomes a client and a dispute develops, you may lose a client, yet you might lose the friendship, too.

2. Unreasonable demands. People are attached to their money. Friends don’t tend to keep “office hours” in their personal relationships. Like a physician, you might be “on call” 24/7 if the stock market is going through a rough period. You value your personal time.

3. You can’t fire friends. What if the relationship doesn’t work out? There doesn’t need to be a problem. The friend might have unrealistic ideas about performance and your ability to see into the future. How do you unwind the relationship?

4. Confidentiality. There’s a certain awkwardness undressing in your doctor’s office. The same feeling might take place when you look under the hood of your friend’s personal finances. They might not want you to know they aren’t as rich as they imply and it would be awkward for you to know.

5. Discounting. They will expect a “friends and family discount” as a wireless provider used to advertise. Why? Because friends don’t charge friends full price.

Why Embrace Doing Business With Friends
It’s easier to make the case why you should strive to become your friend’s personal financial advisor.

1. Size of the pool. It’s difficult to grow your business if you focus on why you won’t do business with friends, pulling names out of your prospect list.

2. Trust. You have earned the trust of your friends and family. If they were a walk in or call in at a financial services firm, it would take time for them to become comfortable enough with a new advisor to open up.

3. Their personal tapestry. You understand what makes their situation unique. Every relationship might start with a financial planning questionnaire, but it doesn’t ask: “Are you pleased or disappointed in your children?” You know the strength of their marriage.

4. Personal attention. They know they won’t be your biggest client, but they have the expectation you will provide them with a similar service level. Why? Because they are your friend.

5. Known quantity. You aren’t an anonymous voice on the phone or the “broker of the day.” You are a person they already know.

6. Objective advice. You’ve heard “break it to me gently.” If your physician tells you the test results show you have a serious disease, they immediately start talking about a treatment program. You are friends with each other. They expect you to give them the unvarnished truth. They won’t expect you to be walking on eggshells.

7. They like you. People do business with people they like.

One More Reason That’s Less Than Obvious
During the pandemic, some people have tried to limit the risk of infection by staying home as much as possible. If your friend was interested in investing and you turned away the business, they aren’t going to give up on the idea of investing. They will do it anyway, going someplace else.

Suppose something goes wrong. They lose 40% of their principle. Their portfolio is a mess. What do they do next? They come back to you! They consider you both a friend and an expert. They show you the shattered remains of their portfolio, asking you to take them on as a client and “make me whole again.” Now you are faced with needing to increase their assets 150% to bring that 40% remained back up to 100%. That’s a tough job.

Since you will likely be called in to sort out the mess if something goes wrong, it makes great sense to simply get involved on the front end and try to keep that from happening.

You might feel awkward approaching a friend for business, but “everyone should have the opportunity to say no.”

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book Captivating the Wealthy Investor is available on Amazon.