Firing Your Friend

 In Advisers, Agents, Expectations, Fees, Financial Planning, Forecasts, Future, Goals, Happiness, Inspiration, Investments, Motivation, Retirees, Retirement, Risk, Sales

Do you do business with a friend?  In what capacity?  How is that working out?  Has it complicated your personal and professional life?  Do you regret the whole situation?  For some people this can work out fine, for others not so much.

In the financial services industry, this can get tricky.  Many people select an adviser due to their friendship and the trust they have developed over the years.  In other cases, after they start with an adviser, they end up becoming closer as they work with them and get to know them better.  But is this a good situation to find yourself in?

I am mixed on this.  I have certainly gotten to know many of the people that I have advised over the years and consider them to be friends.  This has added to my personal and professional satisfaction.  However, my advice would be to only work with an adviser if you are willing to fire them.  Be certain about this – this is your money and your future, it is fair for you to protect what you have earned and be smart about what you are doing.  You cannot continue to work with someone just because they are a friend and the idea of firing them is too painful.

There are a couple of ways to deal with this.  One is to simply not use a friend as a financial adviser.  Or, be sure to keep your financial adviser at arms length as you work with them.  (This can be difficult to do.  Many advisers and clients naturally develop healthy personal relationships).  If you take this approach, you avoid this problem altogether.

Another way is to address this up front or at some point in the relationship.  If you have a friend that is an adviser, let them know that you will hear what they have to say, but if you are not comfortable working together now or in the future, you will need to end the professional relationship.  Ask them, quite directly, “Are you comfortable if it comes to that?  Is that fair?”  By asking this question you have established your expectations and can hopefully maintain a healthy friendship if the business partnership needs to end.

I often hear from clients how they ended up working with friends and it didn’t go well.  At a social gathering recently, a married couple we are friends with were explaining that they were dissatisfied with the fees they were paying on their investments to their adviser.  They were really questioning the value of their financial adviser.  In fact, they were very confident they were overpaying.  However, as we discussed this, they explained how difficult it was to sever the relationship.   I was surprised how the husband explained that he felt like he was in a bind because he hated confrontation.

In this case, like so many, they were basically giving a portion of their future income to their friend. It is not any more complicated than that.  The fees for the services that they could no longer justify were being deducted from their account and going directly to their adviser’s income.

Is this situation any different than just giving money to a friend?  How many of us are willing to do this?  And I am not talking about helping someone who is in a bind or picking up the check or tickets to the show.  In this case, it is the equivalent of giving a regular stream of money to someone – and what makes it even worse is that you feel like you are not getting anything for it.

Do you have any experience with this?  Have you sought out financial guidance from a friend or family member?  How did it go?  Did you have to end the relationship and was it difficult to do?

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