Clients Or Friends? Or Both?

If you think of successful advisors as gregarious extroverts who number their client-friend relationships in the dozens or hundreds, then think again.

Advisors interviewed by National Underwriter say only a handful of their clients become close friends, and for good reason. While friends enrich their lives both personally and professionally, advisors point to several reasons for keeping this elite circle small: the impracticality of socializing with a large group of people; the desire for privacy outside of work; and the challenges of maintaining objectivity when counseling clients who are close to them.

“I dont know that you want to be friends with every client,” says Troy Axelson, a senior financial consultant with Linsco/Private Ledger Corporation, a St. Paul, Minn.-based affiliate of USAllianz. “The friends I do have share my beliefs. And we have the same outlook on life.”

Adds Sharon Emek, a partner at CBS Coverage Group, New York, N.Y.: “Only a small percentage [of my clients] lead to friendshipsmaybe 5%. Well do lunch, play golf or go to a charity event. But as to the rest of my clientele, we really dont interact in each others personal lives.”

And thats no loss professionally. Producers say the key to achieving success in ones practice depends not on establishing tight personal bonds with the client, but in providing exemplary counsel and service. The greater the social distance between advisor and client, the easier it is for the producer to deliver objective guidance, divorced of emotional involvement in the clients circumstances.

There is also the issue of professional pride. Advisors say they prefer the relationship to be founded on winning the clients confidence in their expertise and integrity, rather than any influence they might exert through personal attachment. And, indeed, producers note that many client relationships blossom into a friendship, not vice-versa.

“If I were going to have open heart surgery, I wouldnt ask my best buddy to do the job,” says Bob Nelson, a vice president of the Business & Estate Planning Division at Grace-Mayer Insurance Agency, Omaha, Neb. “I would look for the very best surgeon there is. Similarly, I want the professional relationships in my own practice to be based not on cronyism, but mutual respect.”

When dealing with friends, producers say they sometimes have to be extra diligent in delivering the quality of advice and follow-up service expected by their broader clientele.

“I always remember that I cant take clients who are friends for granted,” says Emek. “I must take care of them, maybe even better than I otherwise would, so they dont think Im muddying the waters. I must always strive to ensure that my judgment is not clouded and my emotions kept in check.”

Thats sometimes difficult, she adds, even with non-friends. Emek points to situations that have upset her to a degree: spouses of friends whose personalities she found troublesome; friends who operated their businesses in ways she didnt agree with; and clients who lied on an insurance application about their smoking and drinking habits.

Sometimes, the point of friction lies beyond the clients or advisors control. Such was the case after the dot-com bubble burst in 2000. It was a time, says Nelson, when many of his closest friends were losing tens or hundreds of thousands of dollars in the stock market. The financial misfortune of one client-friend in particular, he says, was “emotionally disturbing,” impacting his ability to manage the clients assets.

Friendship also can prevent or complicate establishment of the professional relationshipand not only as regards to the advisors friends. Nelson points to a friend of the chairman of his insurance agency who purchased long term care insurance with the caveat that the chairman be denied knowledge of the friends net worth and health history.

“Sometimes a stranger can become a friend more easily than can a friend who doesnt want you to know something about him or her become a client,” says Nelson.

Family relations, too, can be an inhibitor. Nelson cites a prospective client and friend who refused to do business with his firm because the husband of a woman on his staff and the prospect were competitors.

More often, however, the client-friend relationship is a source of satisfaction. Axelson notes that he frequently turns to an older friend for help in making big financial decisions, most recently one involving the purchase of a large house. While he understands the money side of the transaction, the friend aided him in dealing with the emotional aspect of taking on a bigger mortgage.

And, advisors say, it is happy experiences like these that are so rewarding personally and professionally.

“Friendship can be very positive in that you learn about the whole person,” says Emek. “From a professional perspective, friendships have broadened my understanding of how things interact.”

Adds Nelson: “I always consider it a compliment when people come to me for business. When they become a professional friend, or in the rare case where they become a social friend, I consider that my good fortune.”


Reproduced from National Underwriter Edition, November 24, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.