Advisers share stories about their worst clients ever

Every adviser has had one — some have had more than one. Clients so ornery, stubborn or just plain difficult that you wish you had never laid eyes on them. They can disrupt an advisory practice, absorb an inordinate amount of staff time and cause many a sleepless night for an adviser. InvestmentNews asked advisers to share their stories about their worst clients. Hopefully, there are some lessons here, not only about how to deal with these types of clients, but how to avoid them altogether.

The mean, wealthy widow

Love may be blind — but so is money. Chad M. White learned that the hard way when he ended up with a client whose behavior was so disruptive he wanted to get rid of her almost immediately. But he kept postponing the inevitable because she was so wealthy. “You hold on, hoping that they'll become nice to both you and your staff,” said Mr. White, the president at Safe Harbor Wealth Management, an LPL Financial affiliate. He met his worst client at a finance seminar. There were problems from the start. She second-guessed almost all of his investment decisions, Mr. White said, calling frequently to inquire about his transactions. “No matter what I did, it wasn't going to make her happy,” Mr. White said. His client was very focused on investments. Sometimes she'd call his staff, interrogate them harshly and demand to speak with her adviser. Her other sources of financial advice included her bank, where she held millions in certificates of deposit. One time, when Mr. White liquidated one of her index funds, she called the mutual fund company to ask its opinion. The company told her she should have kept the fund. So she demanded he undo his trade and buy the fund back. “She had so much money, and I didn't want to lose her, so you start to make exceptions,” he said. “I don't do that anymore. I don't make exceptions.” He added: “Now I get all my clients to sign off that I have 100% discretion on their accounts.” The lesson: “You don't want to lose a client that has $5 million, but it's not worth it if it's going to take away your peace of mind and your sanity.” —Trevor Hunnicutt

A question of character

In his first meeting with what proved to be his worst client, a red flag went up, Brad Sullivan said. The adviser listened while the prospect, a prominent criminal defense attorney, bragged about how she got a client off for a hit-and-run accident. It was his first year as a financial adviser and he could hardly turn down business, but he just had a bad feeling about her. “Really, that just seems shady,” Mr. Sullivan said. “If someone is almost in a way unprofessionally giddy about how successful they were at a lawsuit, then what's to stop her from being that way with our firm.” After one or two meetings, he suggested they part company. “I don't think we'd be the best fit for what you're looking for,” he remembered saying. “You basically leave it at that. It's like dating. There's no need to get into why.” But Mr. Sullivan said it was a tough choice. “That was hard early on in my retail career, turning away a couple-million-dollar account,” he said. The experience has helped him craft his philosophy about the kind of business he wants to build. “I work with all different types of people. I don't really care about race, sexual preference, I don't care about anything like that,” he said. “But I need to be proud of the wealth that I help people protect and accumulate.” — Trevor Hunnicutt

A lack of trust

George Sisti wants clients who are going to trust him. If they don't, then they might as well not be his clients. The financial adviser with On Course Financial Planning has had a number of bad client experiences, but there are some he'll never forget. In one instance, a client unilaterally changed an investment in his portfolio without telling him. “I'm a financial planner and therefore, I don't make recommendations based on what the market is doing,” Mr. Sisti said. In other words, he's looking at long-term strategy. But one of his clients wasn't. “He was on board, but not really,” Mr. Sisti said. “He was always ready to jump ship.” Ultimately, he did. Mr. Sisti had constructed a diversified portfolio for the client, but at one point, when international stocks suddenly started performing better than domestic equities, the client took it upon himself to go online and change the allocations from domestic to international. But he never told Mr. Sisti. “Anybody whose business model is financial planning knows financial plans determine the portfolio, not timing the market,” Mr. Sisti said. “He changed everything.” In another instance, a client fired him because he was told he'd get a guaranteed 8% return somewhere else. It wasn't the firing that bothered him; it was the way the client did it — via email. “There's nothing that will take the wind out of your sails than getting fired by an email,” Mr. Sisti said. The takeaway for Mr. Sisti is to make sure you screen prospective clients carefully. Just as they are deciding whether they want to work with you, take the time to make sure you want to work with them. “When they think they're screening you, you have to screen them at the same time,” Mr. Sisti said. “Don't think you can ever change a client.” — Alessandra Malito

The impatient investor

Cullen Roche, founder of Orcam Financial Group, received a call in February from a prospective client who said he had been inspired by a recent blog that Mr. Roche had written about the long-term impact of high fees and wanted to move over his account from one of the wirehouses. The client had been paying around 2% in account management expenses at his former firm for what amounted to a traditional 60-40 portfolio that could be easily replicated. Mr. Roche sat down with the client and began transitioning the client over to less expensive funds and charged him Orcam's typical fee of 35 basis points. Over the next few months, the markets were relatively flat. Bonds had peaked and stocks were sluggish, and after a full quarter with Mr. Roche, the client had apparently had enough. “The client was not even down, but the account was flatish, and I think he was suffering from a really short-term perspective,” Mr. Roche said. “He called and informed me that he was moving the account because it had been flat for literally one quarter.” “My guess is he probably sold all those things and is moving back into something similarly inefficient as he was doing before,” Mr. Roche added. It's an extreme example of a common problem among clients. Investors always want their investments to perform like Ferraris when sometimes what they need is a slower and less expensive vehicle, Mr. Roche explained. “I find myself almost being like a personal trainer for investors because they just can't stop eating the wrong things,” Mr. Roche said. “I know [cyclical investing] is boring. I know it gets old, but in the long term, I know it's going to be better for you than constantly tinkering with things.” — Mason Braswell

Caught in the middle

Wayne von Borstel, a 30-year-veteran of the advice industry with his own registered investment adviser, von Borstel & Associates, has seen his share of problem clients. There was the one who demanded an 18% annual return; he lasted eight months. There was another who jeopardized her and her husband's retirement by donating too much money to charity. But his worst clients were a couple who had hired him to help them plan for their marriage. They all met with an estate planning attorney, signed the necessary documents, and the two began investing for their life together. Two weeks later, the clients were back in his office. “She had decided he was a jerk and divorced him,” Mr. von Borstel recalled. “And all of a sudden, I have two people on each end of the table who don't care about logic. They just want to yell and scream.” That was followed by a series of similar meetings trying to work out a fair way to take apart the plan they had put together, Mr. von Borstel said. “You have to have five times the meetings because you never get anything really talked about,” he said. “I was their trusted adviser, but no matter what I say, I'm trapped between those two. It's a lose-lose.” The two eventually stayed on, separately, as clients. Mr. von Borstel learned his lesson, however. He began including a special clause in his contract for hourly billing on “special projects.” “That way I can charge them enough, so they'll fire me,” he quipped. — Mason Braswell

The Spendthrift

Sometimes, no matter how hard advisers try to help their clients, it just doesn't work. With one client in particular, Eric Roberge, an adviser with Beyond Your Hammock in Salem, Mass., found himself having the same conversation over and over again about spending habits. With every meeting, the client would come up with a reason why she had to spend on a particular item or service. Mr. Roberge would disagree. So the inevitable happened: her net worth started decreasing because she was spending too much money. “There are many reasons why a client would go ahead and do something like that even though it's something they shouldn't do,” Mr. Roberge said. “They know they're doing it, but they just don't care.” Mr. Roberge said that as an adviser, his greatest concern is ensuring his clients are moving toward their greatest possible financial life — and he tries to do everything he can to get them there. So it bothers him when someone doesn't take his advice. “I have invested time in my client and tried to do what is best for them,” Mr. Roberge said. “So when something like that happens, in a way, I feel like a failure. And that hurts.” He learned something from it though, and it's that he, like every other adviser, cannot control his clients. He still keeps fighting the good fight — and does so by continuing to talk to his clients about their spending habits. He asks them to envision their futures as debt-free, and what they would do with their money if they had no debt. The answer could be saving up for education or going on a family vacation. Of course, there will always be those clients who don't listen. “Sometimes we can't help the people who need it most,” Mr. Roberge said. “It's a tough reality to face, but one that advisers have to deal with from time to time.” — Alessandra Malito