One of the trickiest areas in an advisory relationship is how to deal with clients who do not tell the whole story or outright lie about relevant information. Obviously, this makes it difficult for an adviser to do the best job for the client since the advice is based on something other than the actual situation. It is made worse by the fact that the adviser cannot always tell what exaggerations, lies or omissions have occurred.
Among the indications that a client is being less than forthcoming are the failure to answer direct questions about goals, investments and income. The failure to provide requested documents and failing to complete a questionnaire are other common indicators. References to working with other advisers or limiting statements such as this is all I want you to consider also suggest you are not getting the full story.
What to do when you suspect a client is not giving you the whole story? Start with very specific requests concerning the client’s financial situation. Vague or incomplete answers can be pursued in hopes of obtaining clarification. If the client persists, it seems likely this is not a client you will want to work with over the long run. A history of changing advisers is another warning which supports your withdrawing from any advisory relationship.
The best clients fully share the necessary information, even if that means they have investments with someone else. They understand that the advisory relationship is built on mutual trust and that without that trust they will not receive the full benefit of the advice and services of the adviser. Those clients who will not participate in the process will likely only bring trouble to the relationship, particularly since you will not be able to give valid advice due to their approach. You do not need these clients.