When An Advisor's Clients Are Family — Literally – Investor's Business Daily

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Many advisors treat their clients as family. What happens when some of them really are family?

A mix of emotions often swirls around money issues. Couple those feelings with familial attachments and you’ve got the makings of a potentially volatile client relationship.

XAutoplay: On | OffYet advisors who count family members as clients often rave about the arrangement. They welcome the opportunity to serve those closest to them, although they acknowledge that tensions can arise.

“I’m supersensitive about insuring that they all have a good experience,” said Drew Rigby, an advisor in Salt Lake City, Utah. He works with many family members including his parents, siblings, and aunts and uncles. “Even with family, you still need to prove to them that you’re worthy of overseeing their assets.”

Advisors who set high expectations for themselves — and who take pride in providing superior service — strive to please all their clients. But special considerations can come into play when relatives sign on.

Family dynamics can affect an advisor’s actions and decisions. If arguments erupt within large clans, and groups of relatives take opposing sides (over an estranged sibling, an eldercare crisis, etc.), the feud can carry over into the advisor-client relationship.

What’s more, nonfamily clients may perceive favoritism if they sense that their advisor prioritizes close relatives. And advisors might make faulty assumptions about serving family, such as skipping the on-boarding process because they figure relatives don’t need the same level of education.

Negotiating fees can introduce discomfort as well. Family members may expect to pay less — or even zero — for an advisor’s service. Experienced financial planners might grant certain relatives a discount, but draw the line at giving away their expertise.

Set Boundaries

Despite these concerns, advisors often enjoy bringing family aboard. Rigby, 33, has a large extended family and estimates that 5% to 7% of his clients are relatives.

“Don’t be scared to work with your family,” he said. “They can be the best clients over time. Just make sure to follow through with everything you promise.”

Setting boundaries poses an occasional challenge for Rigby. Most advisors don’t routinely see their clients outside of work, but Rigby does.

At family gatherings, someone might ask him, “How’s work?” He knows that the questioner is referring to the personal side rather than inquiring about wild swings in their portfolio.

“It can be awkward at times,” he conceded. “If I’m dealing with stress from day-to-day operations of the business, I might withhold something” to avoid burdening them with internal issues.

For some advisors, taking on family members as clients is a natural outgrowth of their close relationships. For example, parents who raise their kids to manage money responsibly may wind up advising those children through adulthood.

Sallie Mullins Thompson, a New York City-based certified financial planner, taught her daughter about budgeting and saving from a young age. Today, the daughter is 42 and her mother’s client.

“It’s different in that you worry a little more,” she said about having her daughter and her daughter’s husband as clients. “I cannot treat them any differently, but I may question myself a little more.”

Similarly, Rigby admits that he “might be a little more self-critical” in serving his family because he’s so eager to excel on their behalf. The pressure to please family members can create what Rigby calls “a sense of urgency.”

Tread Lightly

Newly minted advisors might recruit family members as early clients. Rigby recalls accumulating assets from family and friends when he entered the business.

Many seasoned advisors prefer to tread lightly in marketing their services to relatives. While they will share informal advice and financial knowledge with family, they may hesitate to woo them as clients.

“I think it’s better to wait for them to ask you,” Thompson said. “I’d never ask them if I could be their advisor. But I would provide education to them and give them different ideas, and then they might say, ‘Oh, will you do that for me?'”

Like many advisors who work with family, Thompson discounts her fees for her daughter. She notes that other planners weigh different factors in evaluating whether — and how much — to charge relatives.

“Some advisors have more overhead than I do, so they might charge more in general,” she said. “I work out of my home. I have a virtual assistant. So I have a tendency to charge less” across the board.

Because Thompson has schooled her daughter on financial matters for 30 years, she delights in having a client who understands principles of investing and shares her mother’s sensibilities.

“When the market goes down, my daughter says, ‘Mom, you told me that markets go down,’ ” Thompson said. “She’s prepared. She knows that’s the kind of thing that happens.”

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