Broker Check
On Working (and not working) with Friends & Family

On Working (and not working) with Friends & Family

November 01, 2020

In my professional dealings I often come across people who are working with friends and family as their advisor. They may have taken them on as to help them launch their career, or because of the closeness of their relationship. These may be valid reasons and the advisor-friend may do an excellent job. I am not suggesting one should never make this choice. Rather, I am addressing the challenges of choosing to terminate the relationship when the advisor- friend/family is not/no longer competitive with other advisors/firms.

It is my experience that often a prospective client likes the work we do, and sees substantial value, but struggles to make the change because of the emotional difficulty surrounding a pre- existing relationship with the friend or family member. This issue is common, understandably sensitive, and so disruptive to people choosing their optimal outcome, that I thought sharing my personal and professional experience would be helpful.

As a rule, I do not work with friends or family. Straddling the line between ‘advisor to’ and ‘friend of’ can be tricky. It can be difficult to provide objective advice or obtain necessary but sensitive information when the relationship is too close. The appropriate tendency is for friends and family to provide support. Financial advisors have a different primary responsibility which is our financial health – and ideally financial success. While I am happy to provide solicitated advice, and genuinely want to see the friend or family member succeed financially, having the responsibility for their success can create friction. It can also interrupt the joy of the personal interaction as I am always expected to be ‘on’ professionally.

I do not mind at all when a client becomes a friend, but even then, it is critical to keep a certain professional distance – I am still their advisor and therefore work for them.

Working with the Family-Friend Advisor (hereafter abbreviated to FFA)

There are several key factors to be taken into consideration from the client’s perspective:

  1. What are the odds that of all the advisors in the country, your FFA is best suited to be your advisor? Each advisor has different education levels and expertise as well as experience and personality.
  2. Would you be so quick to hire your family or friend for a job at work? When hiring an employee, do you hire the first person you talk to? I have found that it is usually out of comfort or convenience that the choice is made – by default rather than with intentionality. Doing homework for this role is critical in the pursuit of an appropriate outcome.
  3. Are you the best client for your FFA? The advisor may not want to take you on but also has a hard time saying no – generally advisors are wired to serve people who ask for help.

If you do choose to work with a FFA, it is critical to establish expectations from the beginning. For example, when is it appropriate to discuss the plan? When is it not? (Do you have financial discussions during the ball game, over dinner, or only when scheduled?) How are you going to have difficult conversations? How is either party going to disengage and not negatively affect the relationship?

One of the key components to any advisory relationship is trust. As a reminder, you would evaluate critically a “stranger” for the role of financial advisor. Why would you skip that analysis for an FFA? Typically, you can have a high degree of trust with an FFA, which makes the professional relationship seem obvious. At the same time, trust has at least 3 components:

  1. Honesty 
  2. Relationship
  3. Competence

The FFA is likely to provide honesty. Without this component, I am not sure how any advisor could maintain a solid, long-lasting relationship. Honesty is an expectation, not a courtesy.

The relationship, while it seems like a no-brainer, can be sticky – because it is personal. Being able to have a professional relationship when you know too much about the other person or they know too much about you can cause difficulties. You may be much less apt to take seriously the advice of someone you are close to, or to give it honestly for fear of tainting the personal relationship. Also ‘a prophet is never accepted in his own home’.

Lastly, competence might be the biggest concern with the FFA. Often, someone will choose an FFA who is family or a friend to ‘help them out.’ This may not be the ideal long-term solution. Clients should choose an advisor because they feel they can match to manage their needs. As an advisor, I do not want anyone ‘helping me out.’ I want to be the advisor because the client feels that I am the appropriate person to guide them to their goals. In fact, I prefer it when a prospect has interviewed more than one advisor – so they can have confidence in choosing me.

When it becomes clear that your FFA is not the best it can create discomfort and you may not know how to transition to where you think your family can be better served going forward.

Assessing the Situation – To Change or not to Change

First the client should assess how close this relationship is. Many times, what someone first thought was a friend was merely a college acquaintance. Other times, it genuinely is a very close friend. The same can be true for the family relationship – is this the client’s father or a distant aunt? Not all relationships have the same importance, but in every case, the advisor has a fiduciary duty to their client – no matter if friend or family.

A fiduciary duty is to act in the client’s best interest on an ongoing basis while disclosing any conflicts of interest and costs. If a client can get a better result going in another direction, the advisor has a moral obligation to understand and encourage the change. It is also to be understood, that the advisor is there to serve the client’s needs. The client is never there to meet the needs of the advisor.

If a client is concerned that leaving will adversely affect the advisor’s business, that is even more of a reason to make a move as the advisor’s business is fragile. The implication is that they do not know how to run their own finances. Is this the ideal person to be making financial recommendations and guiding you?

Also consider that family and friends should want the good of the other person. By wanting to stay because of the relationship, you are showing you want their good. The FFA should likewise want you to make decisions that can work toward your financial goals. If they do not and merely want your business and the relationship is threatened because you feel you need to move, then what kind of relationship is that in the first place?

Reasons to Make a Change

Performance is a key result that investors seek when working with a financial professional. We offer our clients an ongoing and active investment and planning process that includes actively managed portfolios and on-going, market sensitive advice. We take advantage of leading-edge financial software, tools and analytics to keep on top of the changing markets, helping our clients navigate them through the ups and the downs.

Quality of service with a personalized approach is also key. We understand every client is unique and they, therefore, deserve a customized approach. Each client receives a fully analyzed and vetted plan shaped around their unique, stated, personal, professional, and financial goals. This plan is live with online access to the client 24/7. We review and update quarterly and monitor as needed based on the client’s needs.

How to Make a Change

Arriving at the need to move is one thing; making the change is another. What do you do? This is a tricky question to answer because each relationship is different. However, there are some principles I have found helpful:

  1. Be grateful for the work you have done together. There is no reason to show resentment if you feel like it could have been done better. The FFA likely did the best they could with the tools and knowledge they have.
  2. Reinforce the importance of the personal relationship and how it is a priority to maintain it and even make it better because of this.
  3. Share the need to go in another direction. Your life and needs change and its normal to need different advisors as they do.
  4. Do not get into the details – Digging into why you are unhappy will just pour salt into the FFA’s wound.
  5. Be kind. Be firm. – do not make it seem like the door is open when it is not.
  6. State the obvious – this is uncomfortable and that you do not want to hurt them.
  7. Make it about something bigger than you. You have an obligation to make changes based on what you feel is in the best interest of your family and finances. You have no choice.
  8. Do not make it personal.
  9. Do not blame your spouse – this always comes across weak and as a poor excuse.

After the conversation, you may do something to strengthen the relationship like sending a text thanking them for their understanding and expressing how much you appreciate them.

As an advisor, I take pride in not losing many clients, but it happens to everyone. I never enjoy it, but understand it is part of the business. I am always professional and helpful. I truly just want my clients to be happy and have a good outcome. I also want them to know that the door is always open. Because of this, clients are welcome and do come back.

I hope these considerations are helpful in figuring out what is best for you and how to make the change that is in the best interest of you and your family. You might be surprised – the advisor may be wanting to make the same change you are. It is not uncommon that if one is uncomfortable, both are.

For me, it is all about the client and their needs. It is my job to do a great job with servicing, investing, planning, and communicating. I share these thoughts because it is my view that many advisors feel this way and those that do not, should!