10 Risks That Keep Friends From Doing Business With You

2. I’m not buying what you are selling.

Risk: You can't solve my problem.

We put people into categories. Lawyers are ambulance chasers. Accountants are bean counters. This means friends think agents are insurance salespeople and advisors are stockbrokers. They do not know how you can help them because they narrowly define what you do.

Approach: Years ago, I heard a financial planner use a great expression. “You know I work at (firm). When you tell others about me, what is it you say that I do?” When they give “the short answer” they would reply: “That’s part of what I do, but I also do (this) and (that).”

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3. You can’t fire friends.

Risk: Doing business together will ruin your friendship.

This can also be expressed as “Can you deliver?” The risk is always on the downside. People work with an advisor to make money. What happens if they lose money? You would want to fire the advisor. That will probably be messy and the friendship goes away with it. The simple solution is to do business with people you don’t know.

Approach: “If we do business together, you should get a report card. If I am doing a bad job, you should be able to fire me.” Portfolio reviews are report cards. You have spelled out an exit strategy. It is a “no pain” for the client approach because you made the suggestion.

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4. If you wanted me as a client, you would have asked.

Risk: You never asked, so you must not want me. I am not going to approach you and get turned away.

We wonder why friends don’t approach us while they may be wondering why we aren’t approaching them. Maybe you do not want to do business with friends.

Approach: Ask. Everyone should have the opportunity to say no. As long as you are respectful, they should be comfortable. Even if they say no, the friendship should remain intact.

You have all the clients you can handle. They may assume your clients are assigned to you.

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5. You don't have time for me.

Risk: You have your hands full with your current clients and aren't taking on new ones.

Like a popular mutual fund, you might be closed to new clients. This can be a problem if you always tell people how busy you are and why you don’t have time to get together.

Approach: When friends ask: “How is business” share anonymous real-life stories. A good one is the new client who was referred by a current client. The subtle message is, “I will find time to help a friend.”

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6. My account is too small.

Risk: Your minimum is more than I currently have to invest and you'll tell me, “Come back when you have made serious money.”

Size matters. "High net worth" always sounds like: “More money than you have.” No one wanted to be turned away from a nightclub because they were too young. It’s embarrassing.

Approach: Instead of mentioning a minimum, which is an over/under conversation, present a range from your smallest to largest accounts along with the size of your average account. A range is inclusive. That should make them comfortable.

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7. I like you, but I don’t have money now.

Risk: You asked for a specific amount. I don’t have it, so I feel I have lost your respect.

You brought up business. They turned you down because they don’t have cash on hand. They will in the future, but that never came up in conversation.

Approach: Make them aware no one sits at home on a bundle of cash waiting for an advisor to call. Timing is everything. Ask if they have some CDs or Treasurys that will be coming due in the next few months. Maybe they get an annual bonus at work. Suggest instances when cash might be available. You can talk then.

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8. Aren’t you new at this?

Risk: New people make mistakes. I don’t want you learning at my expense.

They think you were a great administrator, but what do you know about investing? Isn’t trading stocks a skill learned through experience? They might even say: “Practice on someone else’s money for a couple of years, then we will talk.”

Approach: If they think you are a stock-picker, let them know why “relationship manager” is a better description. Explain how you do business. Sell the expertise and resources of the firm.

I work with someone else already. If someone does not have an advisor, it is by choice.

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9. I already have an advisor.

Risk: Since I only need one advisor, working with you means disengaging with my current advisor.

It is logical to assume they have already found someone unless they made the conscious decision to invest on their own. It may be a relationship that is difficult to unwind, like having your brother-in-law as your advisor.

Approach: Mention many people work with multiple advisors. If they think they only need one, ask how many doctors they see. If they are sticking to “one is enough,” establish yourself as the alternative.

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10. You haven’t figured out I don’t like you.

Risk: I don’t think you are a competent advisor, but I may be railroaded into becoming your client because family sticks together.

We know all about “frenemies.” These are people in your social circle that you encounter often yet don’t count as friends. If you marry into a family and some people think your spouse “married down” you can encounter this hostility. As one advisor once put it, “If you don’t have a good relationship with your brother-in-law, it is unlikely to improve when they become a client.”

Approach: Try to walk away or not approach them for business. Maybe another team member works with them. If the two of you are thrown together, stick with products with few moving parts that perform as advertised. Treasury bills are a good example.

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