Have you developed some close relationships with your clients throughout the course of your career as an advice-based financial planner? If you’ve achieved any level of success, the answer to that question is probably yes. One of the great things about being an independent advisor is that it gives you the freedom to serve. This means you get to work with the people you want to work with and whom you can help the most. It also means you’re likely to develop some attachments to your clients, and these attachments can lead to some potential problems. One of the common mistakes I see made in these situation is when an advisor starts playing favorites. Perhaps he or she agrees with one spouse over the other or favors one of their client’s potential beneficiaries. No matter how it plays out, it’s always a mistake. Here’s why you need to learn how to avoid this pitfall.
You Increase Rather Than Reduce Family Discord
As a fiduciary, you’ll often find yourself acting more as a counselor than a financial planner. This can include helping spouses learn how to talk about money and acting as a mediator when it comes to resolving family problems. When you start taking sides, however, you can no longer help your clients resolve issues. In fact, you end up making them worse. Playing favorites makes a bad situation even worse. Though it may feel like you’re backing up your client at the time, you’ll realize later on that you added negative fuel to the fire instead of helping everyone achieve a resolution that benefits all involved.
You Take on Too Much Responsibility
Should you connect with your clients on a personal level? Yes, that is one of the parts of being an effective fiduciary. However, when you start taking on responsibility for your clients’ feelings and the outcomes of their personal problems, you’ve crossed a line. Your role in your clients’ lives is that of mentor, not therapist or best friend. You are there to guide them on the path to good decisions and when you start taking things personally, it will negatively affect your relationship and business in the end. Draw your lines early and stick to those boundaries throughout your professional career and you will always be able to maintain your effectiveness as well as your integrity.
Your Credibility and Objectivity Are Damaged
Establishing healthy boundaries not only keeps you from becoming too emotionally involved, but it also helps you remain objective. Being able to take a step back and analyze a situation in the role of observer is a key to making rational recommendations based on fact instead of emotion. As soon as the line between advisor and personal friend is crossed, you lose your objectivity and your credibility—in the eyes of your clients, their family members, your colleagues, and even yourself. Though it may be difficult to do in the moment, it is absolutely essential that you remain an unbiased party when working with your clients. To remain emotionally agile, you must be able to remove yourself emotionally. When you play favorites, this becomes an impossible task.
As an independent financial advisor, you’ll find there are many fine lines you need to be aware of. While developing deep relationships is beneficial and most of the time unavoidable, you simply cannot cross the boundaries and forget why you’re there in the first place. Avoid playing favorites with you clients and you’ll find you can retain your objectivity and continue to be a valued resource to those you serve.
Have questions or comments about how to avoid playing favorites as a fiduciary? Please leave them below!
When you become a mentor to your clients, deeply understand them, and guide them toward a better future, then you’ve learned the ways of a financial caregiver. You’ve come to know what it means to be a true purveyor of advice, and how to use money as a conduit to a more fulfilling life for yourself and those you serve.