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.