Imagine if we were REALLY 100% honest with clients
Compliance & Financial Advice & Financial Planning & Sales & Marketing for Professional Services

Imagine if we were REALLY 100% honest with clients

February 22, 2019

by Tony Vidler  CFP logo   CLU logo  ChFC logo

Total honesty with clients is a wonderful idea….but 100% honesty in all things with clients would kill us commercially.  And frankly the consumers, regulators and politicians wouldn’t like it much….despite how much they ask for 100% honesty in all things.

 

Don’t get me wrong: I believe in full transparency and ensuring consumers get all the information.  Being transparent however is not the same as “being honest” is it?

 

What appears to be continually over-looked during the eternal investigations and reports into financial services is that the consumers have a few obligations too.  Advice doesn’t work without co-operation and involvement from consumers, and it is patently unfair to consider that somehow everything which results in a dissatisfied consumer can be traced back to an adviser.

 

Let’s consider the things we might say to clients if we were 100% honest all the time.  We’d actually find ourselves saying things like:

  • This wouldn’t be a problem if you had done your part of the work and filled out the forms.
  • What do you mean you didn’t realise you had to tell the insurer about the time you broke your neck?  I told you verbally twice about disclosing medical history, you signed a declaration saying you’d revealed everything, and then I copied that declaration to you with a letter specifying that you had to reveal everything which might be significant – and now you say it is my fault that it wasn’t disclosed?
  • Of course you have cashflow issues:  it is because you are too arrogant to take advice and you keep spending more money than you have.
  • This is the 5th time I have told you how to resolve this, you don’t want advice do you?  You just want someone else to be responsible for your problems don’t you?
  • We spent ages figuring out what risks you were comfortable taking and what your goals were, and then designed a plan according to YOUR stated objectives and tolerance.  Now you aren’t happy with market returns and think that is my fault even though we explained that this was likely to happen 3 times before you were going to being drawing down the capital…all that has changed is YOU changed the investment timeframe from 20 years to 8 months. Of course you would have had different advice if you’d been honest about how important short term fluctuations were to you…

 

We could go on with dozens of examples, however imagine writing a letter to some of THOSE longstanding clients that was totally honest?

 

Hi

You may not be aware that the laws governing the professional obligations of financial advisers has been changed. In fact it feels like it changes weekly, but as you have not returned one of my calls or kept an arranged appointment for a couple of years, nor read any of the newsletters and updates I send (because my analytics tell me you never open them) I appreciate that this may indeed be news to you.

 

So I thought I would summarise the most important of the changes for you:

 

In effect, I now have to disclose anything and everything to you, whether you want it or not, with 100% honesty.

 

Your investment portfolio has been plummeting in the last year or so.  The performance has been so appalling that you may as well be holding your investments in Russian Roubles or Bitcoin.  But hey, if that doesn’t bother you enough to have a chat then it sure doesn’t bother me.

 

By the way, you insurance programme that I set up for you is now ridiculously out of date as virtually every insurer has updated policy definitions and pricing, but you are sitting with a policy that doesn’t carry those advantages.  Think of it this way; when we set that all up 8 years ago it was like you had come to me and said I have $20,000 to buy a car.  We got you the best car we could for $20,000 at the time.  But now, the prices of cars have continually fallen in real terms during that time AND they come with loads more features and stuff now that didn’t even used to exist…they are just better all round y’know?  We just couldn’t have got you Apple Car Play included with the $20k version back then, but now it would be weird if we didn’t get it, right?

 

Your insurance programme is like that.

 

What have I been doing about all of this for you? Nothing.

 

Why? Well you haven’t cared enough to actually engage with the advice I wanted to try and give you when it began turning into a problem. 

 

I just wanted to make sure you were aware of my revised terms of engagement, because I am still happy to work with you again eventually if you prove that you are committed to actually doing something.  I’ve noted that I have tried to contact you 16 times during the last few years, so the deal now is I’ll get back to you after you’ve made 16 attempts to get back in touch.

 

It’s all about fairness really.

 

Total honesty is a wonderful concept, and perhaps with some of THOSE clients it would be a healthy thing.  For most client relationships however tact is an essential component, as tact tempers total honesty.

 

Transparency should remain the objective in compliance, not “honesty”.

 
You might also be interested in this related article:
It Pays To Keep Some Secrets From Clients
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Comments (4)

  • Tony you know you are going to hell for that blog! Well the radical independents will report you to Santa!

    SMSF Coach - Liam Shorte
  • Fun or not, we all have a few of those clients that are just like that.

    Neill Roynon
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