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More on clients not taking advice

Following up on clients not taking advice…some comments lead to expanding the discussion.

There are some client-adviser relationships where the client makes the investment suggestions and decisions and recommendations by the adviser are not only not encouraged but are in fact ignored. There is absolutely nothing wrong about that approach where the client is a knowledgeable and experienced investor and the adviser is not really retained for investment advice so much as for financial planning advice and access to the adviser’s other services. That the client has made a selection the adviser does not recommend is no reason to let adviser ego get in the way and chill that relationship. Even if the adviser prides him or herself on investment selection and recommendation, if that is not the client’s need and goal, then so be it.

Speaking of egos, they can be fragile things and where a client makes a decision the adviser did not back and the client loses out, this is generally not an occasion for a hearty “I told you so” from the adviser to the client. For example, if the client does not often go counter to the adviser’s suggestions, it is  good opportunity to sympathize with the client – we all make mistakes – and use it as a learning experience as to why the client has retained the adviser and how the adviser can help prevent unnecessary mistakes.

When is a client’s unwillingness to follow the adviser’s recommendations a basis for terminating the relationship? That the adviser has explained his or her investment philosophy to a client and the client has chosen to work with the adviser suggests that the philosophy played a part in that decision. Failure to adhere to the philosophy means that an underlying reason for the association of adviser and client is not understood or does not exist. A meeting should clarify this concern and a choice by the client to continue with the adviser should mean no future issues on this point or else termination is likely. A big reason for both this meeting and a possible termination is the possibility of future litigation by the client dissatisfied with the results, even if the results are of the client’s own choosing and contrary to the adviser’s recommendations. Remember that human nature is often to push responsibility and losses on to others, even when that approach is without a valid basis. 

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