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Bulletproofing Your Practice Against Bad Clients

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From time to time, I see ads on TV from attorneys advising people who may have experienced investment losses that suing their financial advisor may be a solution.

To be sure, some FAs deserve what they get. Criminal behavior is not unique to this or any industry. But there is another side of the dark coin. It’s investors who would use the system to recover losses when they are not entitled, or just outright steal money from financial advisors.

Let’s assume you have one such client in your book right now. Let’s further assume your record-keeping has been sloppy. You, my friend, are at risk of losing your business.

How many bad-apple clients does it take to wreck a career? You know the answer, don’t you? It’s just that one. So protect yourself. In addition to the information in this article, I have created a “Save Your Business” page with important free resources for you at

Obviously, your best protection is doing the right thing, which means following sound investment principles and the ethical guidelines of the industry. But sadly, today, that’s not enough. You can do the right thing and still lose everything.

Consider some possibilities: A client could allege you misrepresented something, perhaps the risk involved in an investment. Or a client’s heirs could allege your recommendations were unsuitable.

What do your notes say about your discussion of risk factors? And what information do you have to back up your claim that the investment recommendations you made were suitable?

While you may have done the right things, if you can’t prove it, your goose is as good as cooked and eaten.

If your first line of defense is doing the right thing, your second line is proving you did the right thing. Your primary tool is a disciplined contact management process.

Contact management is the process of capturing, recording and retrieving information about individuals and small groups one contact at a time. Here’s “The Law” that’s central to this discipline: Every contact and contact attempt with a client or prospect produces an updated record.

YOU: Bill, that’s awfully severe. What if someone calls my assistant to wish him happy birthday? Should that generate an updated record? Suppose I run into a client at the grocery store. We chat a few minutes about the market and then go our separate ways. Should the supermarket contact produce an updated record? Isn’t that going too far?

ME: Yes, yes and no. Yes, the birthday call should produce a note in your database. Yes, you should document the supermarket contact. And no, this is not going too far.

When you allow exceptions to “The Law,” you will come up with other exceptions. When there are a bunch of exceptions, neither you nor anyone on your team can remember exactly what those exceptions are. Soon your documentation process has collapsed.

Note well: it’s not just that you need to document every contact. You need to document every “no contact” as well.

Suppose your assessment of the risk of an investment has changed and you now believe a particular investment falls outside the risk profile of a given client.

You call six times. You leave six voice mail messages. The client does not call. Other things come up and he slips off the screen of our electronic to-do list. Some months later, you get a letter from the senior partner of Grabber, Holder and Headbuttem advising you that your “failure to communicate changed risk factors in that investment has caused our client a substantial loss.” Without documentation that you made every reasonable effort to advise your client of the issue, you are heading down a two-year path to substantial legal bills or, worse, an abrupt change in career path.

Capture, Record, Retrieve

I have been doing a lot of experimentation lately on the best way to capture information. I have studied college note taking systems, and have developed extensive profiles and record update forms. I have concluded that “the good way” to capture information is:

A bound notebook. I buy mine at an office supply store. It goes where I go, and when I’m talking to a client or prospect, I’m taking notes. I file my notebooks in case anyone ever questions whether the conversation occurred. Hand-written documentation is part of your second line of defense.

Printed profile. This is your questionnaire consisting of multiple profiles — family, adult children, parent profiles, business interest profile, etc. etc. Sometimes you will take notes directly on the profile. Sometimes you will add the notes after a call.

A Record Update Form (RUF).Your RUF is a piece of paper on which you write new or changed contact information. It serves as a cheat sheet to remind you of the dozens of data points you can and should review after each contact. Sometimes I write on it. But sometimes the information I would put on it pops up in the middle of a conversation. In that case, I note it in my free form notes in my note book.

Now, let’s talk about records. Your free form notes make sense immediately after a meeting or call. But in just hours or surely days, you will look at those notes and say, “Huh?”

While everything is fresh in mind, you need to review your notes and mark the different categories of information. This enables you to dictate straight through and instruct your computer operator what to do with each piece.

As I review my notes, I mark them with these codes.

C: new or changed contact info, such as phone, nickname, new email address.

F: fact. Who, what, where, when and how. “Bob and I met at our office. We reviewed his bond portfolio.”

A: action. “He wants me to call him next month to set up education plan for grandkids.”

S: vital sales info. This is information needed to push a sale forward. “Kids not savers. Wants to make sure grandkids get education.”

P: vital personal info. “Bob is going to Mayo Clinic next month. Something’s not right with lower back.”

Pr: profile. Depending on your database, you may be able to keep profile info there or you may have to keep a printed profile that you update after each call or meeting.

F: family info. “Marge’s Mom will be coming to visit next month.”

G: goal. “Grandkids’ education covered so they don’t have to work.”

With your notes reviewed and marked, you can now dictate them. Depending sometimes on my mood or other times on location, I will use either Dragon Naturally Speaking or Copytalk. In less than four minutes, I can dictate what happened and instruct my assistant what to do with the information. You will find information on both Copytalk and Dragon on my Save Your Business page.

No assistant? During non-optimum selling time, you become your own computer operator and enter the notes yourself. Think: save my business.

Key concept: you have to have places in your database for each type of information. If you just put everything in long notes, in a relatively short period of time, you will suffer from the most agonizing form of information overload imaginable. In five years, vital information could be buried in 50 different notes. Imagine you are a cook, and all your tools are put in one giant drawer. That’s what happens when all your information is dumped into notes.

Given that you have categorized your information and always put similar information in the same place, it’s a breeze to use the information to maintain your personal and sales conversations. The way my database is organized, I can come up to speed on a client in about 30 seconds.

I have a photo of them. I know where my sales information is, where to find any personal info, where to look for their profile.

Obviously, being able to retrieve useful info depends on properly capturing and recording it.

And one of these days, when a client says, “You never told me….” you can smile and say, “Oh yes I did.” And then you can prove it.


Bill Good is chairman of Bill Good Marketing. His Gorilla CRM System helps advisors double their production or work half as much; visit His seminar program, “No More Pies,” helps advisors manage ETF portfolios using technical analysis; see And his blog,, has lots of useful information for advisors who need to beef up marketing. To preview Bill as a speaker, see his YouTube channel here:


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