Friendship can be a blessing and a curse. You have a lot going in your favor when you approach friends and ask them to be clients. They feel they will get the level of attention you give your top clients. So far, so good. You can handle that.

However, they might feel the easy going nature of your friendship slides seamlessly into business. You must draw the line, sooner, rather than later.

(Related: 10 Things Friends Need to Know Before They Do Business)

Think about how friendships develop. Put dating relationships into the mix. Balance in the relationship can be very dynamic. In the initial stages, you may be putting in lots of energy to win over the other person. This is very common in dating. You are the one making all the calls. Doesn’t the other person know the phone works both ways? In a business relationship with a friend, you may be giving them the “best client treatment” and delivering lots of personalized service, even if the relationship isn’t that big.

Soon, it evens out. You are calling each other about the same number of times. Now you’ve got them interested in what you can do for them, businesswise. They’ve gotten into investing as an activity. This is great because they’ve got lots of money spread all over the place. Think orphaned IRAs, annuities to monitor, paid-up life insurance policies that need review. The spouse has accounts.

Gradually the scales may tilt in your favor. You’ve given 150% of yourself. It’s appreciated. They feel they are getting spectacular service. They tell their friends. Your friend, once a reluctant client, is now a dynamic source of referrals. You’ve gained a great client and plenty of qualified leads and introductions.

So what happens when friends do business with other friends?

1. Unlimited 24/7 Access

As friends you are used to calling and texting all the time. Often it’s relationship type questions. “He said WHAT to you!! I can’t believe it…” Now your friend assumes a sudden stock market decline requires an immediate valuation of the funds within their variable annuity. It’s 11:00 PM on Saturday night. You are both on your fifth tequila shooter. You don’t have your laptop or online account access. You are on the spot.

News flash! This might sound scary, but they are worried about the exact same thing! As their advisor, you will ambush them with sales presentations while they are soaking up the sun on the beach. They think you feel friendships mean 24/7 access.

Bookstore owners (Photo: Thinkstock)

(Photo: Thinkstock)

Here’s what worked for me: When we got our country place years ago, we had an entire new circle of friends who were clients. I told them: “I respect your leisure time. If I want to talk with you about business, I will call between 9 and 5 on a weekday. I won’t approach you on the weekend.

Then I added a twist. “You are not held to the same rule. If something is really important to you, you can bring it up on the weekend. I’m OK with that.” The result was amazing. The response was: “No, we respect your free time too. We will hold business discussions until Monday morning too.”

2. Reporting Performance

Lots of insurance clients also own investment products. They see the market soaring or plunging on TV. (It doesn’t rise or fall, it soars or plunges!) They go into a panic and want an immediate valuation. If they call you at your office on a weekday, that’s pretty easy. It’s not on a Sunday on the golf course. You don’t carry these figures in your head.

Here are two approaches: The first is to have a schedule of portfolio reviews on the calendar. They might be monthly phone calls or quarterly 1:1’s in your office. When they ask at the 9th hole, you might remind them you are scheduled to meet (or talk) in 10 days for a scheduled review.

The second example shows how you can be flexible. You mention, “If this is really serious and you want this addressed as quickly as possible, I can pull together the numbers on Monday morning.” You are letting them know you don’t carry all this information around in your head. They will likely be happy with the formal review date 10 days from now or a proper answer on Monday.

3. Respect for the Rules

This is a nicer way of saying “Don’t break the law.” Friends think friends can just look the other way. If something blows up and friend meets friend in court, they will take a totally different point of view. Your friend and spouse both have IRAs with you. You have an idea for your friend. They love it. “Buy some for my husband too.” If they don’t have a power of attorney, this can come back to haunt you. How about signing documents? “My wife isn’t here, but I sign my wife’s name all the time. Just look away.” This is called forgery. If it ever came up in court, they would say: “I never signed that document. Look, it doesn’t even look like my signature.” Guess who gets caught in the middle.

It’s better to anticipate these problems. Ask if either spouse expects to act on the other’s behalf. If so, get powers of attorney in place. If they want to buy a security for their spouse and don’t have a power of attorney, have them get them on the phone. People carry their Smartphones everywhere. Being honest might sound like an inconvenience, but your clients will respect you for it.

Friends can be great clients. You just need to set some ground rules.

— Read 8 Ways for Agents to Answer ‘What Do You Do?’ on ThinkAdvisor.


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