Where to Draw the Line With Rude Clients

By Brian O'Connell

Investment advisors have enough on their plates without dealing with unruly and unreasonable clients.

The vast amount of financial services clients are rational and decent individuals, but not all of them – and that can be a problem for an investment advisory client.

“Some clients feel like, because they pay you money, they can treat you and your employees terribly,” said Piyush Patel, chief executive officer at Digital Tutors and author of the book “Lead Your Tribe, Love Your Work.”

“As a business leader, it’s important to protect yourself and your employees against toxic clients,” Patel added. “If you fail to do this, you may be making more money in the short-term, but you’re risking the long-term growth of your company.”

Five Good Tips

How can you identify and unplug your practice from problem clients? Try these five tips:

Get ahead of the issue. The best ways to identify potentially toxic financial advisory clients is to vet them beforehand, just like they’re likely vetting you.

“The best time to fire a client is before they actually become one,” said William Stack, founder of Stack Financial Services in Salem, Mo. “By using an extended in-boarding process, we have been able to learn ahead of time who is, and who is not, a good candidate for us.”

Don’t be treated like a salesperson. If a client treats you just as a salesperson, you have a problem.

“While the term ‘professional’ is among the most overused and abused in the English language, the financial planner or comprehensive advisor is a professional in every sense,” said Rob Drury, executive director of the Association of Christian Financial Advisors in San Antonio, Texas. “He or she is licensed and … that advisor has received an extremely high degree of training, and is held to a high ethical standard, and his or her actions are always motivated by the best interests of his client.”

Don’t allow a client to be over-demanding. You don’t have all the time in the world for one individual, and the fact that they pay you for your services does not mean retaining you exclusively, said Calev Bacharach, a small business expert from Riverdale, N.Y.

“A client needs to value your time, as you value theirs. If they keep canceling and disappearing on you, it may be time to move on,” he said.

Regular misconduct. A lack of proper social skills is a big red flag, as well.

“Your client may raise their voice, berate you, and shows you no respect,” Bacharach said. “Some clients pay well enough to be worth the hassle, but most of them don’t. This is where the word ‘toxic’ really means it, because people like that can make you feel really bad inside. It’s just not worth it.”

Don’t prolong the situation. The trick is to let the client fire you, said Michele Sine, portfolio manager at ImpactAdvisor, a boutique registered investment advisory firm in San Francisco.

“A financial advisory/financial planning relationship can be fairly intimate,” she noted. “In order to provide good service, you end up knowing someone’s situation — personal life — fairly well.”

But if it’s a toxic client — if it’s gone that far downhill — your options are limited.

“If you’re at that stage, you’ve let it go past the point where it was simply a matter of letting the client air out their concerns and then you acknowledging the mistake/misunderstanding,” Sine said. “Get them on the phone and to simply ask: ‘Are you happy with the service and investment results?’”

'Move On'

Overall, advisors in doubt over a toxic client need to remember that they are professionals, Drury said.

“While a certain level of trust must be built and respect garnered, those were actually earned by the practitioner long before he met his client,” he noted. “If a physician or attorney encounters such behavior, he is likely to state that he and the patient or client just aren't a good fit, and move on.

“The financial professional should value himself enough to do the same.”

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at [email protected].