It’s happened to everyone. A friend had a need. They knew you are in the financial services profession and asked for your advice. You learned about their situation, did research and proposed a solution. They thanked you. Later you learned they implemented your advice with another advisor. If it came up in conversation, they explained they bought what you recommended elsewhere because it was cheaper. What now?
The problem is not unique. It’s been said electronics retailer Best Buy discovered they were used as a showroom for online retailers. Customers would visit the brick-and-mortar store, learn from the trained staff exactly what they should buy, then find the cheapest price online and buy elsewhere.
What can the advisor do?
The advisor feels used. The friend bought elsewhere. The friend hasn’t placed a value on their expertise and knowledge. They’ve assumed it’s free because friends share. Here are some approaches to consider to move past those feelings while keeping the friendship and the potential to later acquire them as a client.
1. Be patient. Take the high road. A friend needed advice and you stepped up. Wish them well.
Rationale: They may realize they cut you out of the sale. Friendships are complex. They may choose to buy directly from you the next time they have a need.
2. Share news. Let’s assume they bought a stock, bond or another fixed-income product. The next time you are in a casual conversation, mention a news story that might be about that company, a related industry or interest rates. Explain it’s important to know about this because it affects their investment. Stop talking.
Rationale: They might ask why it’s important. You tell them, but also explain they should be hearing about this from the advisor at the firm where they bought the stock. If they say they bought directly online, explain it’s their responsibility to stay current. This is part of the value financial advisors bring to the relationship.
3. Know when to get out. When you buy a stock, you need to know two things: when to buy and when to sell. Their barber, another friend or even you might mention a certain stock. They take action and buy directly. Later, they mention the stock in the context of a price drop. You might say your clients sold their positions and took profits several weeks ago. (Of course, this must be true because you’re an ethical advisor.)
Rationale: Their barber or friend isn’t likely to tell them it’s time to sell, especially if the idea didn’t work out. Remember, friendships are complex. When advisors suggest a stock, it might be a long-term hold, but there is usually a price target. A good advisor tells you what to buy and when, but also when to get out (or buy more).
4. The client-only event. You are planning a dinner seminar featuring a portfolio manager or strategist from your firm. Maybe you’re planning a client recognition barbecue. Your friend wanted to play golf that weekend. You explain you are busy and why.
Rationale: People will go to extraordinary lengths for free food and drink. They will centralize their air travel with one airline and hit spending thresholds because they get lounge access and free drinks when they travel. If your friend discovers clients get invited to exclusive events, they may become a client to get that benefit.
5. Friends talk about you. Here’s a strategy that’s longer term and handoff. You don’t talk about your clients, but you know several other people in the friend’s social circle. You give them your usual above and beyond high level of service. You do quarterly reviews. You invite them to those events mentioned above. Word gets out.
Rationale: Your clients talk about the great care and attention you provide. They know you really care about them. Peer pressure and good judgment should prevail.
You will notice I didn’t mention suggesting they open a tiny account as a first step. That strategy can work, but you might find your friend wants all the benefits while doing almost no business. The ways you can often best help them require a larger relationship.
It can be frustrating when friends pick your brain and then put your advice to work elsewhere. You can take the high road, though, and still keep your friend in the prospect category.
Bryce Sanders is president of Perceptive Business Solutions Inc. His book “Captivating the Wealthy Investor” is available on Amazon. See more from Sanders in the video, “Turn friends into clients.”