Tales from the Trenches

Groucho Marx once joked puckishly: “I never forget a face — but in your case, I’ll make an exception!”

To be sure, seldom has there been an advisor who hasn’t truly felt that sentiment toward an unpleasant, if not exasperating, prospective client: the kind who’ll cheat you out of money; waste your time; then, after taking you for a ride, leave you feeling like a schlemiel.

Of course you pick yourself up and carry on, but you vow never to tangle with that type again. Indeed, more often than not, such experiences occur in the early years of an FA’s practice: You’re hungry for clients and need whatever accounts you can land. But once sucked into situations with a few of these folks, most advisors establish ways to avoid being pushed around or conned in the future.

“Every time you waive your basic rules about how you charge, you’re putting yourself out there to get taken,” says veteran advisor Meg Green, principal of Meg Green & Associates, a Royal Alliance affiliate in North Miami Beach, Fla.

Not that this hasn’t happened to Green herself. Recalling a prospect who, as she puts it, pushed her “greed button,” about 15 years ago she had a panicky call from a man who worked at a major local hospital. He needed financial advice for his sister-in-law pronto. She just received a whopping inheritance, and everybody was trying to rip her off.

“It was several million dollars that was at risk,” says Green, who agreed to meet with the man and his relatives at no charge. She spent a great deal of time with them, talking investments and making arrangements. But when she tried reaching the fellow later, she was shocked to discover that he’d made up the whole story under a fake name.

“He yanked our chain. They were phony. I think they just wanted to come in and pretend they were millionaires for an afternoon. I felt embarrassed, and I’ll never forget it,” says Green. Now for creating a financial plan, she charges most prospects a minimum of $2,500.

Advisor Pat Hinds, principal of Granite Financial, in St. Cloud, Minn., and affiliated with Securities America, still has a bitter taste from a time-robbing referral, the parent of an “A-plus client,” she says. The FA and staff spent four months working on immediate annuity investments so that the elderly prospect and her husband could receive a monthly income as well as gift their grandkids.

The woman refused to drive for 90 minutes to Hinds’ office, so the advisor twice made a mid-day trip to see her at home. Hinds also did tons of paperwork to consolidate the couple’s assets into the annuities. Then, the two abruptly changed their minds. “We had to jump through hoops with the insurance company for several weeks to straighten things out. But we weren’t paid a penny,” says Hinds. “They wound up cashing in the investments and disbursing the money to the grandchildren.”

After a few other hassles with prospects who ultimately opted against coming aboard, Hinds now charges a $100-per-hour fee for up-front work.

Certainly, advisors’ biggest headache prospects are those who perpetrate con games. Ken Buzek, partner in Buzek Kiplinger, in Strongsville, Ohio, for example, had one multi-million-dollar prospect of this ilk brought in by his unsuspecting CPA strategic partner. The man had been doing his own investing and asked Buzek to analyze his portfolio to “show him we could do better and why he should be working with us,” recalls the advisor.

“It was a very nice size client; so we spent three days analyzing all his holdings.” But after all that, the man refused to take Buzek’s calls for a full two months. Finally, the FA got through. “He told me: ‘Oh, I decided I’m doing OK; so I’ll just continue to do it myself.’

“I was so angry!” says Buzek, who is affiliated with Securities America. “He was very slick and conned us into doing a total review of his entire portfolio. He never paid us and then just walked away. He’d brought in all his statements. Generally when someone does that they’re seriously looking for professional help. I felt so stupid! Like, wow, we let that happen!”

Another FA was hoodwinked when a personal friend referred his father. “He told me he was waiting for his funds to clear in Europe and that several million dollars was going to come flying in and that he also had $16 million in an offshore corporation.”

The prospect said he had no liquid funds. So, hoping to nab him as a client, the advisor took a chance and lent him money to stay at a nearby hotel and rent a car. Then the guy just disappeared. The advisor went to his friend: “What’s with your father?”

“Look,” he said. “I can’t tell you anything about my father. He’s like that.” Dumbfounded, the FA berated himself for writing that check.

Mort Potoff, principal with MJP Associates, in Farmington, Conn., and affiliated with Royal Alliance, is super-careful about screening prospects. About three years ago, a 75-year-old referral came in. “The interview was just awful,” recalls Potoff, who thoroughly questions prospective clients as to their investments and risk tolerance.

Querying the woman about her funds, he repeatedly got: “I don’t want to give you the answer!”

“I finally said, ‘When you go to the dentist with a toothache and he asks, “Where is it?” do you say, “Find it!”‘ She looked at me really weirdly. When we finished, I said, ‘This isn’t going to work.’” The woman, from a poor background, was insecure about revealing specifics about her current wealth. “She squirrels away money,” says Potoff.

But the septuagenarian became a client when her tax attorney son phoned Potoff asking him to take her on. “I’ll be at every meeting!” he promised. “He’s kept his word.” Now when Mom starts to clam up, notes Potoff, her son commands, “Mother! Tell him what he wants to know!”

But sometimes even prospects who are totally open about their finances end up jerking advisors around. Pat Hinds had a would-be client with cash-flow problems who was set to undergo surgery not covered by insurance. She needed $38,000. Most of her assets were tied up in annuities or retirement accounts. Hinds did a tremendous amount of research to determine available options and tax ramifications.