Advisor shares story of how client fell victim to a rogue – and what can be done to restore confidence
Unfortunately it seems that every tree can produce the odd “bad apple”. Certainly that seems to be the case in the world of financial advice as we regularly read about advisors that have breached regulation, or, much worse, flat out ‘scammed’ their clients.
Once a client has fallen victim to a rogue it can be difficult to get them interested again in receiving financial advice: even if it is still to their long-term benefit. So how can you reassure them and put them back on track.
This week, Wealth Professional interviewed Sean Harrell, senior advisor at Howe Harrell & Associates. He recalls the case one of one client who put her faith in the wrong advisor.
“Last year I met a lady who was referred to an advisor by her brother,” he said. “She was nervous about being in charge of her finances without the help of her recently deceased husband.
“She did everything right, she sought a referral from a trusted source and started investing after a few meetings. Everything seemed to be moving along smoothly until she started receiving her monthly income statements. She noticed she was receiving a monthly withdrawal from her non-registered account. She called the advisor and asked why this was happening as she had previously told the advisor that this non-registered money was earmarked as an inheritance for her children. The advisor told her that this is the way she should take the money and to not worry about leaving an inheritance to her two sons. She was upset at his comment but trusted that he was looking out for her.
“After receiving a few more statements in 2015 she noticed that her investments had dropped in value substantially. Frustrated, she reached out to me via text late one evening asking if I could give her a second opinion on her accounts. After a review it became apparent why she was receiving money from her non-registered account.
“The advisor had back-end loaded 100 per cent of her funds and could not produce enough fee-free income from her RRIF’s to satisfy her needs. The advisor therefore topped up her income via withdrawals from her non-registered account that was earmarked for her sons. The lady felt betrayed and she called the advisor to ask why he structured her account this way.
“His response was: ‘back-end loaded funds have higher rates of return, I am looking out for your best interests. Your children don’t need this money.’ Needless to say, the lady made a complaint against the advisor to the MFDA.”
Perhaps Harrell was fortunate in that the client turned to him in a time of need so he was quickly able to restore her confidence and earn her trust by showing her the ‘right’ way. However, Harrell believes that this approach – the idea of fixing one small problem to ‘prove yourself’ to clients - can be applied elsewhere too, and help to build up trust.
“Working with clients who have been wronged by another advisor is an uphill battle,” he said. “It’s hard for them to trust again. In this case it took a year from the time I first reviewed the clients improperly structured accounts to the time when she transferred the money to our firm.
“If you can help a client fix a specific problem or concern I find that they become very loyal clients and do a lot of great advertising for you. It’s sometimes a long haul but in the end worth all the effort.”
What is your approach to dealing with clients that have had bad experiences in the past? Leave a comment below to share your thoughts.
Once a client has fallen victim to a rogue it can be difficult to get them interested again in receiving financial advice: even if it is still to their long-term benefit. So how can you reassure them and put them back on track.
This week, Wealth Professional interviewed Sean Harrell, senior advisor at Howe Harrell & Associates. He recalls the case one of one client who put her faith in the wrong advisor.
“Last year I met a lady who was referred to an advisor by her brother,” he said. “She was nervous about being in charge of her finances without the help of her recently deceased husband.
“She did everything right, she sought a referral from a trusted source and started investing after a few meetings. Everything seemed to be moving along smoothly until she started receiving her monthly income statements. She noticed she was receiving a monthly withdrawal from her non-registered account. She called the advisor and asked why this was happening as she had previously told the advisor that this non-registered money was earmarked as an inheritance for her children. The advisor told her that this is the way she should take the money and to not worry about leaving an inheritance to her two sons. She was upset at his comment but trusted that he was looking out for her.
“After receiving a few more statements in 2015 she noticed that her investments had dropped in value substantially. Frustrated, she reached out to me via text late one evening asking if I could give her a second opinion on her accounts. After a review it became apparent why she was receiving money from her non-registered account.
“The advisor had back-end loaded 100 per cent of her funds and could not produce enough fee-free income from her RRIF’s to satisfy her needs. The advisor therefore topped up her income via withdrawals from her non-registered account that was earmarked for her sons. The lady felt betrayed and she called the advisor to ask why he structured her account this way.
“His response was: ‘back-end loaded funds have higher rates of return, I am looking out for your best interests. Your children don’t need this money.’ Needless to say, the lady made a complaint against the advisor to the MFDA.”
Perhaps Harrell was fortunate in that the client turned to him in a time of need so he was quickly able to restore her confidence and earn her trust by showing her the ‘right’ way. However, Harrell believes that this approach – the idea of fixing one small problem to ‘prove yourself’ to clients - can be applied elsewhere too, and help to build up trust.
“Working with clients who have been wronged by another advisor is an uphill battle,” he said. “It’s hard for them to trust again. In this case it took a year from the time I first reviewed the clients improperly structured accounts to the time when she transferred the money to our firm.
“If you can help a client fix a specific problem or concern I find that they become very loyal clients and do a lot of great advertising for you. It’s sometimes a long haul but in the end worth all the effort.”
What is your approach to dealing with clients that have had bad experiences in the past? Leave a comment below to share your thoughts.
